In which of the following cases would the quantity of money demanded be smallest?
A)r = 0.06, P = 1.2
B)r = 0.05, P = 1.0
C)r = 0.04, P = 1.2
D)r = 0.06, P = 1.0

Question

Quizplus · Accepted Answer

The quantity of money demanded is typically smaller when the interest rate (r) is higher and the price level (P) is lower, as a higher interest rate increases the opportunity cost of holding money (leading to less money being held) and a lower price level decreases the amount of money needed for transactions. Option D has the highest interest rate and the lowest price level.

In Which of the Following Cases Would the Quantity of Money