Which of the following affects demand for money?

Question

Quizplus · Accepted Answer

All three factors affect demand for money.

A) Prices: if prices increase, people need more money to buy the same amount of goods and services, so demand for money increases.

B) Nominal income: if income increases, people might want to hold more money to take advantage of investment opportunities, so demand for money increases.

C) Interest rate: if interest rates increase, the opportunity cost of holding money instead of other assets (such as stocks, bonds, or real estate) increases. This reduces demand for money.

Which of the Following Affects Demand for Money