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A student makes the following observation: "I don't understandwhy changes in the interest rate affect...

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Economics

A student makes the following observation: "I don't understandwhy changes in the interest rate affect the amount of money peoplewant. Don't people have an infinite demand for money? Who wouldwant less money just because the interest rate went up?" Do youagree with this student? A. Disagree. At higher interest rates,individuals will choose to hold less money and moreinterest-bearing assets. B. Agree. An increase in the interest rateincreases the opportunity cost of holding money and thereforeincreases the quantity of money demanded. C. Disagree. Interestrates only affect the demand for interest-bearing assets, not thedemand for money. D. Agree. If the demand for wealth is infinite,so is the demand for money, so people would never want to hold lessmoney.

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