Money demand depends on
A)the price level and the interest rate.
B)the price levels but not the interest rate.
C)the interest rates but not the price level.
D)neither the price level nor the interest rate.

Question

Quizplus · Accepted Answer

Money demand is the quantity of money that people are willing to hold at a given level of income and interest rates. The price level affects money demand because if prices increase, people will need to hold more money to make the same purchases. Similarly, the interest rate affects money demand because if interest rates rise, people will prefer to hold more interest-bearing assets instead of cash. Therefore, money demand depends on both the price level and the interest rate.

Money Demand Depends on