If interest rates decrease:
A)the quantity of money demanded will not change.
B)the money demand function will shift to the right.
C)the quantity of money demanded will decrease.
D)the money demand function will shift to the left.
E)the quantity of money demanded will increase.

Question

Quizplus · Accepted Answer

When interest rates decrease, the opportunity cost of holding money decreases, meaning that individuals and firms will want to hold more of it. This leads to an increase in the quantity of money demanded. Therefore, the correct choice is E - the quantity of money demanded will increase.

If Interest Rates Decrease