An increase in the price level shifts the money-demand curve to the left, making interest rates rise.

Question

Quizplus · Accepted Answer

An increase in the price level would shift the money-demand curve to the right, making interest rates rise. This is because as the price level increases, individuals will want to hold more money to finance their increased spending, leading to an increased demand for money and thus higher interest rates.

An Increase in the Price Level Shifts the Money-Demand Curve