The quantity demanded of money falls as the
A) interest rate falls.
B) interest rate rises.
C) supply of money rises.
D) none of the above,since the quantity demanded of money is unrelated to the interest rate

Question

Quizplus · Accepted Answer

According to the theory of demand for money, the quantity demanded of money falls as the interest rate rises. This is because higher interest rates provide an opportunity cost for holding money, as individuals can earn a higher return by investing in other assets, such as bonds or stocks. As a result, when interest rates rise, people tend to hold less money and demand fewer loans, which decreases the quantity demanded of money.

The Quantity Demanded of Money Falls as the