Question

The demand for money curve depicts a. an inverse relationship between the quantity of money demanded...

The demand for money curve depicts

a. an inverse relationship between the quantity of money demanded and the interest rate.

b. a direct relationship between the quantity of money demanded and the quantity of bonds demanded

.c. a direct relationship between the quantity of money demanded and the interest rate.

d. an inverse relationship between the quantity of money demanded and the quantity of bonds demanded.

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Answer #1

Since the money demand curve is downward sloping and money supply curve is vertical line.

The equilibrium interest rate and equilibrium quantity of money is determined by the intersection of money supply curve and money demand curve.

On the vertical axis of money market, interest rate is plotted and on the horizontal axis quantity of money is plotted.

Hence it can be said that the demand for money curve depicts an inverse relationship between the quantity of money demanded and the interest rate.

Hence option a is the correct answer.

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