As income rises
A)money demand rises, so the interest rate rises.
B)money demand rises, so the interest rate falls
C)money demand falls, so the interest rate rises.
D)money demand falls, so the interest rate falls.

Question

Quizplus · Accepted Answer

As income rises, people tend to spend more, which increases the demand for money. This will lead to an increase in the interest rate to balance the increased demand for money with the limited supply available. Therefore, option A is the correct choice.

As Income Rises