The money demand curve slopes:
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 real GDP increases.
D)upward because people demand more money as real GDP decreases.
E)downward because people demand more money as the price level decreases.

Question

Quizplus · Accepted Answer

The money demand curve slopes downward because as the interest rate decreases, the opportunity cost of holding money (in terms of foregone interest) decreases, making people willing to hold more money at lower interest rates.

The Money Demand Curve Slopes