Question

The demand for money A. is an upward sloping function of the interest rate. B. is positively related to the opportunity cost of holding money. C. is a downward sloping function of the interest rate. D. None of the above.

Answer 1

The correct answer is letter C

The speed of currency circulation is a measure of the number of times that a currency unit changes ownership, in a given period.

The postulate of proportionality of the Quantitative Theory of Currency requires that the speed of circulation of the currency be virtually stable in the short term, determined by: (a) the community habits of possession of the currency related to receipts and disbursements (frequency, durability and synchronization of payments) ; (b) institutional and technological factors.

Answer 2

Answer:C. is a downward sloping function of the interest rate.

Explanation: The demand for money is a downward sloping function of the interest rate, it means that the higher the interest rates on bonds and other alternative investments, will cause

people want to hold less of their wealth in the form of money. This goes ahead to show that if the chance is available for higher interest rate in certain kinds of investment,people will not be ready or they will lose interest in keeping money in the form of cash,they will rather keep them in other forms like bonds and other marketable securities.