On a diagram wherein the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the asset demand for money can be represented by:
A)a line parallel to the horizontal axis.
B)a vertical line.
C)a downward sloping line or curve from left to right.
D)an upward sloping line or curve from left to right.

Question

Quizplus · Accepted Answer

The asset demand for money is downward sloping because as the interest rate decreases, people will want to hold more money rather than invest it, leading to a higher quantity of money demanded. Conversely, as the interest rate increases, people will want to hold less money and invest more, leading to a lower quantity of money demanded.

On a Diagram Wherein the Interest Rate and the Quantity