The demand-for-money curve illustrates the __________ relationship between the quantity demanded of money and __________.
A) inverse; the interest rate
B) direct; GDP.
C) direct; the interest rate
D) inverse; GDP

Question

Quizplus · Accepted Answer

The demand-for-money curve shows an inverse relationship between the quantity demanded of money and the interest rate. As the interest rate goes up, the opportunity cost of holding money increases, so people demand less money. Conversely, as the interest rate falls, the opportunity cost of holding money decreases, so people demand more money. The curve does not illustrate a relationship between the quantity demanded of money and GDP.

The Demand-For-Money Curve Illustrates the __________ Relationship Between the Quantity