U.S. banks did not offer interest on checking accounts until the beginning of the 1980s. Then banking regulations changed, allowing banks to pay interest on checking account funds. As a result, the _____ money _____ and shifted the money demand curve to the _____.
A) supply of; fell; left
B) demand for; fell; left
C) demand for; rose; right
D) supply of; rose; right

Question

Quizplus · Accepted Answer

The demand for money rose, as individuals were now incentivized to keep their funds in checking accounts that offered interest. This shift in behavior caused a movement along the money demand curve to the right, as individuals were now willing to hold more money at each interest rate.

US Banks Did Not Offer Interest on Checking Accounts Until