An increase in the nominal interest rate leads to a
A) rightward shift in the demand for money curve.
B) movement upward along the demand for money curve.
C) leftward shift in the demand for money curve.
D) movement downward 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 would lead to a movement upward along the demand for money curve because people would want to hold less money as it becomes more expensive to do so. However, it would not cause a shift in the demand for money curve, as the factors determining the demand for money remain unchanged.

An Increase in the Nominal Interest Rate Leads to a