Ceteris paribus,the quantities of money people are willing and able to hold
A)Decrease as interest rates fall.
B)Increase as interest rates fall.
C)Increase as the money supply decreases.
D)Decrease when the speculative demand increases.

Question

Quizplus · Accepted Answer

The quantity of money people are willing and able to hold is determined by the opportunity cost of holding money, which is the interest rate. When interest rates fall, the opportunity cost of holding money decreases, so people are willing to hold more money. Therefore, the quantities of money people are willing and able to hold increase as interest rates fall.

Ceteris Paribus,the Quantities of Money People Are Willing and Able