Fewer purchases online with credit cards would lead to what change in the money market?

• A. A downward movement along a fixed money demand curve.
• B. The money demand curve to shift outward.
• C. The money demand curve to shift inward.
• D. An upward movement along a fixed money demand curve.

Answer: (D)

The money market idea here is about how much money people want to hold at a given interest rate. If fewer purchases are made online with credit cards, people end up relying more on cash for transactions, so the amount of money they want to hold increases. With the money supply held fixed in the short run, that higher demand for money pushes up the interest rate until money demanded equals the fixed supply. This adjustment happens as a change along the same money-demand curve—an upward movement along the curve as the interest rate rises. So the situation is best described as an upward movement along a fixed money-demand curve.

In contrast, a shift of the money-demand curve would occur if determinants like income or price level changed, not just the interest rate. And the phrasing here points to movement along the curve due to the interest-rate adjustment, not a shift of the curve itself.