The money demand curve is _____ because a lower interest rate _____ the opportunity cost of holding money.
A) upward sloping; increases
B) downward sloping; increases
C) upward sloping; decreases
D) downward sloping; decreases

Question

Quizplus · Accepted Answer

When the interest rate decreases, the opportunity cost of holding money decreases. Therefore, people prefer to hold more money and demand for money increases. This leads to a downward sloping money demand curve.

The Money Demand Curve Is _____ Because a Lower Interest