When interest rates rise, the quantity demanded of money held for the:
A) speculative motive rises.
B) precautionary motive rises.
C) transactions motive falls.
D) precautionary motive falls.
E) speculative motive falls.

Question

Quizplus · Accepted Answer

When interest rates rise, the opportunity cost of holding money increases, leading to a decrease in the quantity of money held for speculative purposes, as people prefer to invest in interest-bearing assets.

When Interest Rates Rise, the Quantity Demanded of Money Held