Keynesians argue that the interest elasticity of the demand for money is
A)low,while monetarists say it is high.
B)unimportant in terms of affecting economic activity,while monetarists disagree.
C)relatively high,while monetarists argue it is low.
D)not a factor in determining if velocity is stable or unstable.

Question

Quizplus · Accepted Answer

Keynesians argue that interest rates affect consumption and investment spending, which in turn affect the demand for money. Therefore, they argue that the interest elasticity of the demand for money is relatively high. Monetarists, on the other hand, argue that the demand for money is primarily based on transaction motives and is relatively insensitive to changes in interest rates, thus stating that the interest elasticity of the demand for money is low.

Keynesians Argue That the Interest Elasticity of the Demand for Money