Why Is the Demand for Real Money Balances Downward Sloping

question 46

Multiple Choice

Why is the demand for real money balances downward sloping?

• A)because the opportunity cost of holding money decreases as interest rates decrease
• B)because when the interest rate falls the quantity of money demanded increases
• C)because lower interest rates encourage firms and households to increase their money holdings
• D)all of the above
• E)none of the above

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Definitions:

Big Five

A theory describing five broad dimensions of human personality traits: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Neuroticism

A personality trait characterized by a tendency to experience negative emotions, such as anxiety, depression, and anger, more frequently and intensely than others.

Openness to Experience

A personality trait characterized by a willingness to try new things and be open to new experiences.

Big Five

A theory in psychology that identifies five main dimensions of personality: openness, conscientiousness, extraversion, agreeableness, and neuroticism.