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.

Question

Quizplus · Accepted Answer

According to the theory of money demand, as interest rates decrease, the opportunity cost of holding money (instead of earning interest) decreases, leading people to be willing to hold more money (i.e. demand for money increases). Conversely, as interest rates increase, the opportunity cost of holding money increases, leading people to be willing to hold less money (i.e. demand for money decreases).

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