Keynesians believe that the interest elasticity of money demand
A)is lower than that believed by monetarists.
B)is higher than suggested by monetarists.
C)is completely elastic.
D)is completely inelastic.
E)none of the above.

Question

Quizplus · Accepted Answer

Keynesians argue that the demand for money is more interest elastic than monetarists suggest, meaning that changes in interest rates have a greater effect on the demand for money according to Keynesian theory. Monetarists tend to believe in a less elastic demand for money, where changes in interest rates have a smaller effect on the quantity of money demanded.

Keynesians Believe That the Interest Elasticity of Money Demand