What does the quantity of money demanded vary inversely with?
A)real GDP
B)the interest rate
C)the prime rate
D)the inflation rate

Question

Quizplus · Accepted Answer

The quantity of money demanded varies inversely with the interest rate. This means that if the interest rate increases, people will demand less money and if the interest rate decreases, people will demand more money. This relationship is based on the fact that people can earn more interest when the interest rate is high, so they don't need to hold onto as much cash. Conversely, when the interest rate is low, people won't earn much interest, so they need to hold more cash to meet their needs.

What Does the Quantity of Money Demanded Vary Inversely With