A rise in the price level causes the demand for money to ________ and the interest rate to ________,everything else held constant.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase

Question

Quizplus · Accepted Answer

A rise in the price level increases the demand for money because people need more money to buy the same goods and services. This increased demand for money leads to higher interest rates, as people are willing to pay more to borrow money.

A Rise in the Price Level Causes the Demand for Money