The demand for money is a relationship between:
A)the price level and the amount of cyclical unemployment.
B)the price level and the actual output produced in an economy.
C)the interest rate and how much money people choose to hold.
D)the interest rate and how much money people earn during a certain time period.
E)the interest rate and the rate of inflation.

Question

Quizplus · Accepted Answer

The demand for money is the amount of money that people choose to hold as a store of value. This decision is influenced by the interest rate; as the interest rate increases, the opportunity cost of holding money also increases, so people are less likely to hold onto money and more likely to invest it or spend it. Therefore, the demand for money is a relationship between the interest rate and how much money people choose to hold.

The Demand for Money Is a Relationship Between