Money demand increases as the price level decreases in the economy.

Question

Quizplus · Accepted Answer

Money demand typically decreases as the price level decreases. When prices are lower, individuals and businesses need less money to purchase goods and services, so they do not have as high of a demand for money. Conversely, when the price level increases, individuals and businesses need more money to purchase goods and services, causing an increase in money demand.

Money Demand Increases as the Price Level Decreases in the Economy