If the interest rate decreases
A)or if the price level increases,then people will want to hold more money.
B)or if the price level increases,then people will want to hold less money.
C)or if the price level decreases,then people will want to hold more money.
D)or if the price level decreases,then people will want to hold less money.

Question

Quizplus · Accepted Answer

When the interest rate decreases, holding money becomes more attractive because the opportunity cost of holding money (foregone interest) is lower. Similarly, if the price level increases, people need more money for transactions, so they will want to hold more money.

If the Interest Rate Decreases