What does the concept of money demand imply regarding the relationship between interest rates and the amount of money people want to hold?

Show Answers

There is a direct correlation between interest rates and the quantity of money demanded.There is an inverse correlation between the price level and the quantity of money demanded.There is a negative correlation between aggregate output and the quantity of money demanded.There is an inverse relationship between interest rates and the quantity of money demanded.

Explanation

The demand for money reflects an inverse relationship between interest rates and the quantity of money people wish to hold. When interest rates rise, holding money becomes less attractive compared to interest-bearing assets, so the quantity of money demanded decreases.