CFA Practice Question

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CFA Practice Question

Which would cause people to hold more money on hand?

I. A higher price level of goods and services
II. Lower nominal interest rates
III. A higher real GDP
Correct Answer: I, II and III

A higher price level or an expansion of real GDP will require greater money balances to conduct the same level of transactions, thus increasing the demand for money. Lower interest rates reduce the opportunity cost of holding money balances and will increase the quantity of money demanded.

User Contributed Comments 5

User Comment
danlan I and III cause a curve shift to the right. II causes a shift along the curve.
cfashark which curve?
MaiHuong Demand curve
MMattioli demand curve for money
choas69 change in interest and quantity demanded for money causes a movement along the line.
other factors will cause a shift.
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