In considering the demand for money in the monetary approach to the balance of payments, it can be said that the money demand would increase if home real income __________ and if the home interest rate __________.
A) decreases; also decreases
B) decreases; increases
C) increases; decreases
D) increases; also increases

Question

Quizplus · Accepted Answer

The demand for money typically increases when home real income increases because people have more income to hold in the form of money for transactions and other purposes. Additionally, the demand for money decreases when the home interest rate increases because higher interest rates make holding money less attractive compared to other interest-bearing assets.

In Considering the Demand for Money in the Monetary Approach