The most important variable affecting the demand for money in the long run is the:
A)nominal interest rate
B)real interest rate
C)price level
D)velocity of money

Question

Quizplus · Accepted Answer

In the long run, the most important variable affecting the demand for money is the price level. As prices increase, individuals and firms need more money to conduct transactions, leading to an increase in the demand for money. Conversely, as prices decrease, less money is needed, leading to a decrease in the demand for money. The nominal interest rate and velocity of money can also affect the demand for money, but they are not as significant in the long run as the price level. The real interest rate is not a variable that directly affects the demand for money.

The Most Important Variable Affecting the Demand for Money in the Long