An increase in the nominal interest rate
A) shifts the demand for money curve rightward.
B) shifts the demand for money curve leftward.
C) leads to a downward movement along the demand for money curve.
D) leads to an upward movement along the demand for money curve.

Question

Quizplus · Accepted Answer

An increase in the nominal interest rate leads to a decrease in the quantity of money demanded, causing an upward movement along the demand for money curve. This is because an increase in the interest rate makes saving more attractive than spending or borrowing, resulting in a decrease in the demand for money.

An Increase in the Nominal Interest Rate