According to Friedman, how does the price level, as a determinant, affect the nominal demand for money?

CA Foundation · Business Economics · PYQS · September 2025
According to Friedman, how does the price level, as a determinant, affect the nominal demand for money?
(A) A. It has no effect.
(B) B. It is negatively related to the demand for money.
(C) C. A rise in the price level increases the demand for money and vice versa.
(D) D. A rise in the price level decreases the demand for money.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

C. A rise in the price level increases the demand for money and vice versa.

Topics: Money Market

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