The market demand curve for money is
A)Vertical because it is a fixed amount regardless of changes in the interest rate.
B)Horizontal because it is determined by the individual.
C)Upward-sloping to the right because people wish to hold more money at higher interest rates and less money at lower interest rates.
D)Downward-sloping to the right because people wish to hold less money at higher interest rates and more money at lower interest rates.

Question

Quizplus · Accepted Answer

The market demand curve for money is downward-sloping to the right because people wish to hold less money at higher interest rates and more money at lower interest rates. When the interest rate decreases, the opportunity cost of holding money decreases, so people demand more money. When the interest rate increases, the opportunity cost of holding money increases, so people demand less money. Therefore, the market demand curve for money is downward-sloping.

The Market Demand Curve for Money Is