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AP Macroeconomics Mkt 3 A a Define Using Graphs As Appropriate the Money Market Money Demand and Money Supply B Explain Using Graphs As Appropriate Questions

Interpret money-demand graphs by separating interest-rate movements from income or price-level shifts and using forgone interest as opportunity cost.

Syllabus
Effective Fall 2026
Course
AP Macroeconomics

Exam points

  • explain the downward-sloping money-demand curve through the opportunity cost of holding money
  • distinguish an interest-rate movement along money demand from a shift of the curve
  • predict how a change in real income or the price level shifts money demand

AP Macroeconomics Mkt 3 A a Define Using Graphs As Appropriate the Money Market Money Demand and Money Supply B Explain Using Graphs As Appropriate Questions question 1

[Maximum number: 1]

The money demand curve is downward sloping because

A

the transaction demand for money decreases as interest rates fall

B

people hold less money as the opportunity cost of holding money rises

C

money is less liquid as interest rates rise, so people are able to hold less of it

D

banks are more willing to create money when interest rates fall

E

with higher incomes, people are willing to hold smaller percentages of their money

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