The money demand curve will shift to the left if:
A)the nominal interest rate increases.
B)the nominal interest rate decreases.
C)the price level increases.
D)the price level decreases.

Question

Quizplus · Accepted Answer

If the price level decreases, people needs less money for transactions and they desire less money at all nominal interest rates. The money demand curve shifts to the left. Note that since the nominal interest rate is measured on the vertical axis, changes in nominal interest rates cannot shift the curve, but would be seen as a movement along the curve.

The Money Demand Curve Will Shift to the Left If