When the nominal interest rate rises, the
A) quantity of money demanded decreases.
B) demand for money decreases.
C) demand for money increases.
D) quantity of money demanded increases.

Question

Quizplus · Accepted Answer

When the nominal interest rate rises, the cost of holding money increases, leading to a decrease in the quantity of money demanded. This is because people prefer to hold their wealth in interest-bearing assets rather than in cash.

When the Nominal Interest Rate Rises, the