Which of the following is NOT a determinant of money demand in the standard model?

• A. Income (transactions).
• B. Interest rate.
• C. Prices.
• D. Tax revenue.

Answer: (D)

The money people want to hold is determined by how much they transact (linked to income), the opportunity cost of holding money (the interest rate), and the overall price level. When income rises, more transactions occur, so the transaction demand for money increases. When the interest rate goes up, holding money becomes more costly in terms of foregone interest, so people reduce their money holdings. And when prices rise, more nominal money is needed to buy the same goods, boosting money demand. Tax revenue isn’t part of this direct mechanism; it affects fiscal policy and possibly income, but it does not directly determine the amount of money people want to hold at given income and interest rate.