In 2007, interest rates in Germany were 4.7 percent while the inflation rate was 1.7 percent. In 2008, interest rates increased to 5.3 percent and the inflation rate increased to 2.0. As a result, there is
A) a leftward shift in Germany's demand for money curve.
B) a downward movement along Germany's demand for money curve.
C) a rightward shift in Germany's money supply curve.
D) an upward movement along Germany's demand for money curve.

Question

Quizplus · Accepted Answer

The increase in interest rates from 2007 to 2008 indicates a higher cost of borrowing money, which typically reduces the quantity of money demanded. This is represented as an upward movement along the demand for money curve, not a shift of the curve itself.

In 2007, Interest Rates in Germany Were 4