The money demand curve has a
A)negative slope because an increase in the interest rate decreases the quantity of money demanded.
B)positive slope because an increase in the interest rate increases the quantity of money demanded.
C)negative slope because an increase in the price level decreases the quantity of money demanded.
D)positive slope because an increase in the price level increases the quantity of money demanded.
E)positive slope because an increase in the interest rate increases the value of future savings.

Question

Quizplus · Accepted Answer

The money demand curve has a negative slope because an increase in the interest rate decreases the quantity of money demanded. This is because as the interest rate increases, the opportunity cost of holding money also increases, making it more expensive to hold onto money instead of investing it or using it for other purposes.

The Money Demand Curve Has a