Which of the following events would shift money demand to the right?
A)an increase in the interest rate or an increase in the price level
B)an increase in the interest rate,but not an increase in the price level
C)an increase in the price level,but not an increase in the interest rate
D)neither an increase in the interest rate nor an increase in the price level

Question

Quizplus · Accepted Answer

An increase in the price level will lead to an increase in money demand as people will need more money to purchase the same amount of goods and services. An increase in the interest rate would lead to a decrease in money demand, as people would be more likely to save and less likely to borrow money. Therefore, option C is the best choice, as it indicates an increase in money demand caused by an increase in the price level without a corresponding increase in the interest rate.

Which of the Following Events Would Shift Money Demand to the Right