Which of the following statements is true?
A) The speculative demand for money at possible interest rates gives the demand for money curve its upward slope.
B) There is a direct relationship between the quantity of money demanded and the interest rate.
C) According to the quantity theory of money, any change in the money supply will have no effect on the price level.
D) People hold money to pay unpredictable expenses or against 'rainy days'.

Question

Quizplus · Accepted Answer

The demand for money for precautionary purposes, such as for unpredictable expenses or emergencies, explains why people hold money aside from transactions or speculative reasons. This is a well-recognized motive in economic theory, contrasting with the incorrect statements about the speculative demand for money, the relationship between money demand and interest rates, and the quantity theory of money's implications on price levels provided in the other options.

Which of the Following Statements Is True