When the nominal interest rate increases, the
A) quantity of money demanded increases and there is a movement upward along the demand for money curve.
B) quantity of money demanded decreases and there is a movement upward along the demand for money curve.
C) demand for money increases and the demand for money curve shifts rightward.
D) demand for money decreases and the demand for money curve shifts leftward.
E) supply of money curve shifts rightward.

Question

Quizplus · Accepted Answer

When the nominal interest rate increases, the opportunity cost of holding money increases, leading to a decrease in the quantity of money demanded. As a result, there is a movement upward along the demand for money curve. Therefore, choice B is the best answer. Choices A, C, D, and E are incorrect.

When the Nominal Interest Rate Increases, the