In the context of the money market, which of the following sequences correctly describes the impact of an increase in income levels on nominal interest rates?

When people earn more money, they tend to spend more, which increases the demand for money. This higher demand means that more people want to hold cash for transactions, which can put upward pressure on interest rates. As banks notice that more money is needed for loans and transactions, they may increase the nominal interest rates to balance the supply and demand for money. For example, if a community experiences a boom in jobs and wages, local businesses might need more loans to expand, leading banks to raise interest rates. Thus, an increase in income levels generally leads to higher nominal interest rates in the money market.