Question

The demand for money is the relationship between the quantity of money demanded and the​ _____, when all other influences on the amount of money that people wish to​ _____ remain the same. A. real wage​ rate; spend B. real interest​ rate; hold C. quantity of​ output; spend D. nominal interest​ rate; hold

Answer 1

Answer:

The correct answer is letter "D": nominal interest​ rate; hold.

Explanation:

The demand of money refers to the amount of money people prefer to hold in cash instead of investment vehicles or assets. The demand for money is proportional to individuals' income and the interest rate. According to this approach, when the interest rates are higher, people prefer to invest. When interest rates fall, people prefer to hold cash.

Therefore, the demand for money explains the relationship between the quantity of real money demanded and the nominal interest rate that people prefer to keep, remaining the same all other factors that influence the amount of money.