Which of the following changes will cause a downward movement along the money demand curve?
A) an increase in the interest rate
B) a decrease in the interest rate
C) a decrease in real GDP
D) an increase in real GDP
E) an increase in the price level

Question

Quizplus · Accepted Answer

A decrease in the interest rate will cause a downward movement along the money demand curve because people will hold more money when the opportunity cost of holding money (the interest rate) is lower.

Which of the Following Changes Will Cause a Downward Movement