Asked by Elaiha Ramos on Jun 18, 2024
Verified
The demand for money is a relationship between:
A) the price level and the amount of cyclical unemployment.
B) the price level and the actual output produced in an economy.
C) the interest rate and how much money people choose to hold.
D) the interest rate and how much money people earn during a certain time period.
E) the interest rate and the rate of inflation.
Cyclical Unemployment
Unemployment that results from economic recessions and downturns, reflecting a lack of demand for goods and services.
Money Demand
The desire to hold cash or cash equivalents based on liquidity preference, influenced by interest rates, income levels, and transaction needs.
Interest Rate
The cost of borrowing money or the reward for saving, typically expressed as a percentage of the principal amount per annum.
- Comprehend the connection between the levels of interest rates and how much money is requested.
- Discern the aspects that affect the circulation and availability of monetary resources in the economy.
Verified Answer
CD
Carly DiagoJun 23, 2024
Final Answer :
C
Explanation :
The demand for money is the amount of money that people choose to hold as a store of value. This decision is influenced by the interest rate; as the interest rate increases, the opportunity cost of holding money also increases, so people are less likely to hold onto money and more likely to invest it or spend it. Therefore, the demand for money is a relationship between the interest rate and how much money people choose to hold.
Learning Objectives
- Comprehend the connection between the levels of interest rates and how much money is requested.
- Discern the aspects that affect the circulation and availability of monetary resources in the economy.