Which one of the following will shift the demand for money curve rightward?
A)an increase in real GDP
B)an increase in the price level
C)a decrease in the price level
D)an increase in the interest rate
E)a decrease in the interest rate

Question

Quizplus · Accepted Answer

An increase in real GDP will lead to an increase in transactions and income, causing people to demand more money to carry out transactions, thereby shifting the demand for money curve to the right.

Answer: E
 A decrease in the interest rate will increase the opportunity cost of holding money, prompting people to invest their money instead, and thus reducing the demand for money. As the demand for money decreases, the demand for other investments will increase, shifting the demand for money curve to the right.

Which One of the Following Will Shift the Demand for Money