Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers use credit cards more frequently, reducing their need for cash, which shifts the money demand curve leftward.
B
A rise in interest rates leads consumers to save more cash, resulting in an increase in money demand.
C
The government increases taxes, causing consumers to rely more on cash transactions, thus increasing money demand.
D
A technological advancement in cash management reduces transaction costs, increasing the demand for physical money.
Understanding the Answer
Let's break down why this is correct
Answer
When credit card fees decrease, using credit cards becomes cheaper for consumers. This means more people are likely to use credit cards instead of cash because they save money on fees. As a result, the demand for physical money, like cash, might decrease since people prefer the convenience of credit cards. For example, if a restaurant lowers its credit card processing fee, more customers might choose to pay with their cards instead of cash, reducing the need for cash transactions. Overall, lower credit card fees encourage people to rely more on electronic payments, leading to a decline in the demand for physical money.
Detailed Explanation
When credit card fees go down, people like using credit cards more. Other options are incorrect because Some might think that higher interest rates make people save more cash; It's a common mistake to think that higher taxes always mean people need more cash.
Key Concepts
Money Demand
Interest Rates
Consumer Behavior
Topic
Money Demand and Interest Rates
Difficulty
easy level question
Cognitive Level
understand
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