Columns (1)and (2)indicate the transactions demand (D t )for money and columns (1)and (3)show the asset demand (D a )for money:
-Refer to the above information.These data suggest that the amount of money that society wishes to hold as an asset:
A) varies directly with the interest rate.
B) varies inversely with the interest rate.
C) varies inversely with the GDP.
D) is independent of the interest rate.

Question

Quizplus · Accepted Answer

The data in columns (1) and (3) suggest an inverse relationship between the interest rate (represented by the opportunity cost of holding money as an asset) and the amount of money society wishes to hold as an asset. As the cost of holding money (interest rate) increases, the demand for money as an asset decreases. Therefore, the best choice is B.

Columns (1)and (2)indicate the Transactions Demand (Dt)for Money and Columns

Columns (1)and (2)indicate the Transactions Demand (D_t)for Money and Columns