alleryOther things equal, when the rate of interest rises, the demand for money:
Afalls
Bstays exactly constant
Cbecomes zero
Drises
Answer & Solution
Correct answer: A. falls
Holding money means forgoing interest, so a higher interest rate makes people hold less money — demand for money falls.
Keep practising Unit 1A: Basic Economic Concepts and Production Systems
Browse all Unit 1A: Basic Economic Concepts and Production Systems questions for CUET UG, or explore more Economics topics.
Related questions
Which of the following can act as a store of value but lacks the universal acceptability oTo increase the money supply, the RBI is most likely to:For money to perform its store-of-value function well, it is necessary that:When the central bank acts as 'a bank to the banking system', it is performing the functioA Cash Reserve Ratio of 25% corresponds to a money multiplier of:On a bank's balance sheet, total assets are made up of:In the goldsmith (Lala) story, money created 'out of thin air' illustrates:The Statutory Liquidity Ratio (SLR) refers to reserves that banks must keep: