When interest rates rise, the quantity of money demanded _______, causing a move _______ along the money demand curve.
A) decreases; leftward
B) increases; leftward
C) decreases; rightward
D) increases; rightward

Question

Quizplus · Accepted Answer

When interest rates rise, the cost of borrowing money increases, so people demand less money. This causes a decrease in the quantity of money demanded, which results in a leftward shift along the money demand curve.

When Interest Rates Rise, the Quantity of Money Demanded _______