An increase in decreases the quantity of money people want to hold.
A) the price level
B) the quantity of money
C) real GDP
D) the interest rate

Question

Quizplus · Accepted Answer

According to the quantity theory of money, an increase in the interest rate (the cost of holding money) will decrease the quantity of money people want to hold. As the interest rate rises, people are more likely to save their money in interest-bearing accounts, invest in financial assets or purchase goods and services earlier, which reduces the demand for money.

An Increase in Decreases the Quantity of Money People Want