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AP® Macroeconomics

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Moderate

Transactional Demand

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The demand curve for money generally slopes down to the right on a normal supply and demand curve. However, the Transactions Demand of money is vertical.

Why is this the case?

A

People want more money when the price (interest rate) is high.

B

People want more money when the price (interest rate) is low.

C

People want the same amount of money to conduct transactions whether the interest rate is high or low.

D

The interest rate is irrelevant to the quantity demanded because transactional demand is about the need to facilitate transactions and not the rate of return.

E

Both C and D.