An outward shift of the money demand function indicates an increase in the market rate of interest and hence a decrease in the level of investment in the economy.

Question

Quizplus · Accepted Answer

An outward shift of the money demand function indicates an increase in the demand for money at each interest rate, which typically leads to an increase in the market rate of interest. However, the relationship between interest rates and investment is inverse; higher interest rates generally lead to a decrease in investment, not an increase.

An Outward Shift of the Money Demand Function Indicates an Increase