When the Nominal Interest Rate Rises,the Quantity of Money Demanded

question 509

Multiple Choice

When the nominal interest rate rises,the quantity of money demanded decreases because

• A) people will buy fewer goods and hold less money.
• B) the price level also rises and people decrease their demand for money.
• C) people move funds from interest-bearing assets into money.
• D) people shift funds from money holdings to interest-bearing assets.

---

Definitions:

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, often targeting higher incomes with higher tax rates.

Monetary Policy

The process by which a central bank or monetary authority manages the supply of money and interest rates to achieve macroeconomic objectives like controlling inflation, consumption, growth, and liquidity.

Federal Reserve Board

The governing body of the Federal Reserve System, the central bank of the United States, responsible for overseeing the country's monetary policy.