Recession's Impact on the Money Market

Question

In a recession, nominal GDP typically declines. What is the most likely alteration in the Money Market graph due to a recession's impact on transaction demand for money?

Accepted Answer

The money demand curve shifts left, leading to a lower equilibrium interest rate and reduced quantity of money exchanged.

Answer

The money supply curve shifts left, which increases the equilibrium interest rate.

Answer

The money demand curve shifts right as people hoard cash, thereby increasing the equilibrium interest rate.

Answer

No shifts occur because the money market is unaffected by changes in nominal GDP.