Flatter money demand curve implies one of the following:
A) The money demand is less sensitive to interest rate.
B) Small increases in interest rates (and yields) lead to larger switches from money to interest-earning assets.
C) The money demand is less sensitive to changes in output.
D) The money demand is less sensitive to changes in exchange rates.

Question

Quizplus · Accepted Answer

A flatter money demand curve indicates that money demand is more sensitive to changes in interest rates, meaning small increases in interest rates lead to larger shifts from holding money to holding interest-earning assets.

Flatter Money Demand Curve Implies One of the Following