The effect of an increase in the nominal interest rate on the demand for money curve is to
A) shift the demand for money curve rightward.
B) create a movement upward along the demand for money curve.
C) create a movement downward along the demand for money curve.
D) shift the demand for money curve leftward.

Question

Quizplus · Accepted Answer

An increase in the nominal interest rate leads to a movement upward along the demand for money curve because people hold less money as the opportunity cost of holding money (foregone interest) increases.

The Effect of an Increase in the Nominal Interest Rate