In which of the following situations would people want to hold more money?
A) when the price level increases and the interest rate increases
B) when the price level decreases and the interest rate decreases
C) when the price level increases and the interest rate decreases
D) when the price level decreases and the interest rate increases

Question

In which of the following situations would people want to hold more money?  
A) when the price level increases and the interest rate increases 
B) when the price level decreases and the interest rate decreases 
C) when the price level increases and the interest rate decreases 
D) when the price level decreases and the interest rate increases

Quizplus · Accepted Answer

When the price level increases, people need more money for transactions due to higher prices. When the interest rate decreases, holding money becomes more attractive compared to saving, as the opportunity cost of holding money (foregone interest) is lower.

In Which of the Following Situations Would People Want to Hold