The demand for money represents the idea that there is ?
Correct answer: D. a negative relationship between the interest rate and the quantity of money demanded
- A. a positive relationship between the interest rate and the quantity of money demanded
- B. a negative relationship between the price level and the quantity of money demanded
- C. a negative relationship between the level of aggregate output and the quantity of money demanded
- D. a negative relationship between the interest rate and the quantity of money demanded
Explanation
The speculative demand for money varies inversely with the interest rate: people prefer holding money when rates are low and bonds when rates are high. Therefore, a higher interest rate reduces the quantity of money demanded.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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