The demand for real money balances ________.
A)is downward sloping with respect to prices
B)is downward sloping with respect to interest rates
C)is downward sloping with respect to income
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The demand for real money balances is downward sloping with respect to interest rates because as interest rates increase, the opportunity cost of holding money (which earns little or no interest) increases, leading people to hold less money in favor of interest-bearing assets.

The Demand for Real Money Balances ________