An Important Difference Between Keynes's Approach to the Demand for Money

question 68

Multiple Choice

An important difference between Keynes's approach to the demand for money and Friedman's approach is that

• A)there is no role for the opportunity cost of holding money in Friedman's theory.
• B)in Keynes's theory, changes in output have no effect on the demand for money.
• C)in Friedman's theory, money demand responds only slightly to short-run fluctuations in income.
• D)in Keynes's theory, money demand is a function of the real interest rate, rather than the nominal interest rate.

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