Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases money demand as people save less.
B
It has no effect on money demand.
C
It increases money demand as people are more willing to spend.
D
It decreases money demand as people invest more in stocks.
Understanding the Answer
Let's break down why this is correct
Answer
When consumer confidence increases, people feel more secure about their jobs and financial situations. This often leads them to spend more money, thinking they will continue to earn and have enough resources. As a result, the demand for money increases because consumers want to have cash available to make purchases, whether for goods or services. For example, if a family feels confident about their financial future, they might decide to buy a new car, which means they need more cash on hand or access to funds. Thus, higher consumer confidence generally leads to a greater demand for money in the economy.
Detailed Explanation
When people feel confident about the economy, they are more likely to spend money. Other options are incorrect because Some might think that saving less means needing less money; It's a common belief that confidence doesn't change money needs.
Key Concepts
Money Demand
Shifts in Money Demand
Topic
Money Demand and Interest Rates
Difficulty
medium level question
Cognitive Level
understand
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