The demand for money curve shows the relationship between the quantity of money demanded and
A) the nominal interest rate.
B) the real interest rate.
C) the inflation rate.
D) real GDP.
E) nominal GDP.

Question

Quizplus · Accepted Answer

The demand for money curve reflects the relationship between the quantity of money demanded and the nominal interest rate. As the nominal interest rate increases, the opportunity cost of holding money (which does not earn interest) also increases, thereby reducing the quantity of money demanded. Therefore, the demand for money curve slopes downward.

The Demand for Money Curve Shows the Relationship Between the Quantity