The interest elasticity of money demand is estimated to be
A) small in absolute value.
B) large in absolute value.
C) highly volatile.
D) not statistically different from zero.

Question

Quizplus · Accepted Answer

The interest elasticity of money demand is typically small in absolute value, meaning that changes in interest rates have only a small impact on the demand for money. This is because the demand for money is largely driven by transactional needs and habits, which are relatively insensitive to interest rate changes.

The Interest Elasticity of Money Demand Is Estimated to Be