Just like the nominal demand for money, the real demand for money
A) varies positively with the quantity of investment.
B) varies positively with the interest rate.
C) varies negatively with GDP.
D) varies negatively with the interest rate.
E) varies not at all with the price level.

Question

Quizplus · Accepted Answer

The real demand for money varies negatively with the interest rate because as interest rates increase, the opportunity cost of holding money (instead of investing it) increases, leading people to hold less money.

Just Like the Nominal Demand for Money, the Real Demand