The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the interest rate will cause a movement from: Figure 15.1

A)point B to point A.
B)point A to point B.
C)DM to DM'.
D)DM to DM*.
E)point E to point D.

Question

​The figure given below shows the interest rate on the vertical axis and the quantity of money on the horizontal axis.In this figure,an increase in the interest rate will cause a movement from: Figure 15.1

A)point B to point A. 
B)point A to point B. 
C)DM to DM'. 
D)DM to DM*. 
E)point E to point D.

Quizplus · Accepted Answer

An increase in the interest rate will cause a movement from point B to point A along the demand curve (DM). This is because higher interest rates will decrease the quantity of money demanded, as it becomes more expensive to borrow and people will hold onto their money instead.

​The Figure Given Below Shows the Interest Rate on the Vertical

The Figure Given Below Shows the Interest Rate on the Vertical