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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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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