A change in which of the following will have a direct effect on the amount of money individuals wish to hold in the current period?
A)the current nominal interest rate
B)the current real interest rate
C)the expected future nominal interest rate
D)the expected future real interest rate
E) all of the above

Question

Quizplus · Accepted Answer

The current nominal interest rate directly affects the return on holding money in the current period, so individuals will hold less money when the nominal interest rate increases and more money when the nominal interest rate decreases. Real interest rates and expected future interest rates may indirectly affect the amount of money individuals want to hold, but they do not have a direct effect on current money demand. Therefore, options B, C, D, and E are incorrect.

A Change in Which of the Following Will Have a Direct