An increase in the nominal interest rate leads to
A) a leftward shift in the demand for money curve.
B) a rightward shift in the demand for money curve.
C) a movement downward along the demand for money curve.
D) a movement upward along the demand for money curve.
E) neither a shift in nor a movement along the demand for money curve.

Question

Quizplus · Accepted Answer

An increase in the nominal interest rate causes individuals and businesses to hold less money for any given level of income, leading to a movement upward along the demand for money curve as it becomes more expensive to hold money compared to other assets.

An Increase in the Nominal Interest Rate Leads to