The demand curve for money
A) shows the amount of money balances that individuals and businesses wish to hold at various levels of private investment.
B) reflects the open market operations policy of the Federal Reserve.
C) shows the amount of money that households and businesses wish to hold at various rates of interest.
D) indicates the amount that consumers wish to borrow at a given interest rate.

Question

Quizplus · Accepted Answer

The demand curve for money shows the amount of money that households and businesses wish to hold at various rates of interest. It is based on the opportunity cost of holding money, which is the foregone interest income that could have been earned by investing the same amount of money. As interest rates increase, the cost of holding money increases, and people will demand less of it, leading to a downward sloping demand curve.

The Demand Curve for Money