The quantity of money demanded will decrease if the
A) inflation rate decreases.
B) nominal interest rate decreases.
C) real interest rate decreases.
D) nominal interest rate increases.
E) price level rises.

Question

Quizplus · Accepted Answer

When the nominal interest rate increases, the opportunity cost of holding money rises, leading to a decrease in the quantity of money demanded as people prefer to invest in interest-bearing assets.

The Quantity of Money Demanded Will Decrease If the