Velocity will be ________ if the demand for money with respect to the interest rate is perfectly elastic.
A) negative
B) constant
C) variable
D) zero

Question

Quizplus · Accepted Answer

When the demand for money with respect to the interest rate is perfectly elastic, it implies that any change in the interest rate does not affect the quantity of money demanded. In this scenario, velocity, which is the rate at which money circulates in the economy, remains constant because changes in interest rates do not influence the demand for money, and hence, the speed at which money circulates does not change.

Velocity Will Be ________ If the Demand for Money with Respect