The transactions demand for money will increase when

Question

Quizplus · Accepted Answer

The transactions demand for money depends on the level of national income. As national income increases, people's spending patterns change and they need more money to carry out transactions, thus increasing the demand for money. A) is incorrect because an increase in interest rates may actually decrease the demand for money as it becomes more expensive to borrow. B) is incorrect because a fall in price level would decrease demand for money as people would need less of it to make purchases. D) is incorrect because a decrease in national income would likely decrease the demand for money due to decreased spending.

The Transactions Demand for Money Will Increase When