If inflation increases from 2% to 5%, the money demand curve will:
A) remain constant.
B) remain constant, but the quantity of money demanded will decrease.
C) shift to the left.
D) shift to the right.

Question

Quizplus · Accepted Answer

When inflation increases, people expect that they will need more money to buy the same goods and services as before, leading to an increase in the demand for money. This is represented by a rightward shift in the money demand curve.

If Inflation Increases from 2% to 5%, the Money Demand