All else equal, a higher interest rate implies a _____ quantity of money demanded and therefore a ____ the money demand curve.

Question

Quizplus · Accepted Answer

Higher interest rates make holding money less attractive because the opportunity cost of holding money, rather than investing it, increases. This leads to a lower quantity of money demanded, but it does not shift the money demand curve itself; rather, it results in a movement along the existing curve.

All Else Equal, a Higher Interest Rate Implies a _____