The portfolio theories of money demand state that the demand for real money balances is ________ related to income and ________ related to the nominal interest rate.
A)positively;negatively
B)positively;positively
C)negatively;negatively
D)negatively;positively

Question

Quizplus · Accepted Answer

The portfolio theories of money demand suggest that as income increases, individuals demand more real money balances for transactions and other purposes, indicating a positive relationship. Conversely, as the nominal interest rate increases, holding money becomes more costly (since individuals forego interest they could earn on other assets), leading to a negative relationship between the demand for real money balances and the nominal interest rate.

The Portfolio Theories of Money Demand State That the Demand