Question

if the GDP increases what happens to the monetary demand ?

Answer 1

The demand for money increases due to the increase in the GDP. GDP is said to be the indicator off the growth of an economy. Thus any increase in GDPO implies the increase in demand for money in the economy. It means that people will be able to borrow more money at this time. The production will be high in the economy with high rate of GDP. Thus people shown higher demand to the commodities. It gradually leads to increase in demand of money. People requires mo0neey to meet various motives such as contingency , transaction and speculative. So as GDP in economy increases people requires money to satisfy their transactional motives. In nut shell it can be said that money demand and GDP have positive relation each other.