When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis an increase in the interest rate ?
Correct answer: B. decrease the quantity demanded of money
- A. None of these answers
- B. decrease the quantity demanded of money
- C. increase the quantity demanded of money
- D. decreases the demand for money
- E. increases the demand for money
Explanation
A higher interest rate raises the opportunity cost of holding money, so people choose to hold less money. This is a movement along the money-demand curve, not a shift of the curve.
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