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.

Question

Quizplus · Accepted Answer

The money demand curve shows the relationship between the interest rate and the quantity of money demanded. As the interest rate increases, the opportunity cost of holding money increases, which decreases the quantity of money demanded. Therefore, the money demand curve has a negative slope.

The Money Demand Curve Has a