If interest rates increase, what will happen to the demand for reserves?
A)It will shift outward.
B)It will shift inward.
C)Nothing, the economy will move to a new quantity demanded.
D)It depends on what happens to prices.

Question

Quizplus · Accepted Answer

When interest rates increase, the cost of holding reserves becomes higher, leading to a movement along the demand curve to a new quantity demanded, rather than a shift in the demand curve itself.

If Interest Rates Increase, What Will Happen to the Demand