When considering the change to the money demand curve, if the interest rate rises, the quantity demanded is:
A) lower, moving leftward along the money demand curve.
B) higher, moving leftward along the money demand curve.
C) lower, moving rightward along the money demand curve.
D) higher, moving rightward along the money demand curve.

Question

Quizplus · Accepted Answer

When the interest rate rises, the opportunity cost of holding money increases, making it more expensive to hold onto cash rather than investing it. As a result, people will demand less money at each interest rate, leading to a decrease in the quantity demanded and a leftward shift of the money demand curve.

When Considering the Change to the Money Demand Curve, If