-In the above figure, suppose the economy is initially on the demand for money curve MD₁. What is the effect of a fall in the nominal interest rate? A) There would be a movement downward along the demand for money curve MD₁. B) The demand for money curve would shift leftward to MD₀. C) There would be a movement upward along the demand for money curve MD₁. D) The demand for money curve would shift rightward to MD₂.

Question

Quizplus · Accepted Answer

A fall in the nominal interest rate would lead to a movement downward along the demand for money curve MD₁ as people hold more money when interest rates are lower.

-In the Above Figure, Suppose the Economy Is Initially on the Demand