When the money market is depicted in a graph with the value of money on the vertical axis, as the price level increases, what happens to the value of money?
A) It increases, so the quantity of money demanded increases.
B) It increases, so the quantity of money demanded decreases.
C) It decreases, so the quantity of money demanded decreases.
D) It decreases, so the quantity of money demanded increases.

Question

Quizplus · Accepted Answer

When the price level increases, the value of money decreases because each unit of currency buys fewer goods and services. This decrease in the value of money leads to an increase in the quantity of money demanded, as people need more money to purchase the same amount of goods and services.

When the Money Market Is Depicted in a Graph with the Value