Chapter 28, Problem 1MCQ

To determine

Change in which of the options will cause movement along the money demand curve.

Explanation of Solution

In simple words, movement along the demand curve refers to the change in the position of the graph due to a change in prices. The money demand curve will often move to the right as the overall price level rises. This implies that for any particular interest rate, the economy's consumers will want more money. A leftward shift in the money demand curve will be correlated with a decline in the overall price level. As a result, at any given interest rate, the economy's consumers will want less money.

Thus, from the above, we can conclude that the correct option is A.

Economics Concept Introduction

Introduction:

A money demand curve shows the relationship between money demand and interest rates. As expected, it is negatively skewed given that people tend to hold less money and invest more when interest rates rise.