According to portfolio theories of money demand, increases in wealth the demand for money, and increases in the expected inflation rate the demand for money.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease

Question

Quizplus · Accepted Answer

According to portfolio theories of money demand, as wealth increases, people have more resources to allocate, which can increase the demand for money. However, if the expected inflation rate increases, the demand for money decreases because people prefer to hold assets that are not losing value due to inflation.

According to Portfolio Theories of Money Demand, Increases in Wealth