Which way does the money demand curve slope?
A) downward, because the cost of holding money decreases as the interest rate decreases
B) downward, because the cost of holding money increases as the interest rate decreases
C) upward, because people demand more money as GDP increases
D) upward, because people demand more money as GDP decreases

Question

Which way does the money demand curve slope?  
A) downward, because the cost of holding money decreases as the interest rate decreases 
B) downward, because the cost of holding money increases as the interest rate decreases 
C) upward, because people demand more money as GDP increases 
D) upward, because people demand more money as GDP decreases

Quizplus · Accepted Answer

The money demand curve slopes downward because as the interest rate decreases, the opportunity cost of holding money (instead of investing it) decreases, making people more willing to hold money.

Which Way Does the Money Demand Curve Slope