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

Question

Quizplus · Accepted Answer

The interest rate represents the opportunity cost of holding money rather than earning interest on other assets. When the interest rate increases, the opportunity cost of holding money increases, leading people to want to hold less money and instead invest in interest-bearing assets. Therefore, an increase in the interest rate decreases the quantity of money people want to hold.

An Increase in __________Decreases the Quantity of Money People Want