When the nominal interest rate rises, the quantity of money demanded decreases because
A) the price level also rises and people decrease their demand for money.
B) people will buy fewer goods and hold less money.
C) people move funds from interest-bearing assets into money.
D) people shift funds from money holdings to interest -bearing assets.

Question

Quizplus · Accepted Answer

When nominal interest rates rise, holding money becomes relatively less attractive compared to interest-bearing assets, leading people to shift their funds from money holdings to interest-bearing assets, thus decreasing the quantity of money demanded.

When the Nominal Interest Rate Rises, the Quantity of Money