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JAMB Economics 2013 Question 27

Question 27

Money and Inflation

The speculative demand for money is inversely related to the

  1. A.interest rate.
  2. B.level of income.
  3. C.exchange rate.
  4. D.inflation rate.
Show the answer and explanation

Answer: A (interest rate.)

Explanation

When interest rates are high, people hold bonds rather than idle cash, so speculative demand for money falls.