Suppose the money supply and the price level are constant, and the demand for money is a function of…

Higher income raises money demand at a given interest rate; with fixed real money supply, interest must rise to restore equilibrium. The intended escribes this demand shift and interest rise. Strictly, the final equilibrium quantity of money held remains fixed; the phrase 'increase in quantity demanded' must refer to the initial rate, not the final equilibrium. Choices predicting a lower rate or a leftward demand shift do not fit. an increase in the quantity of money demanded and an increase in the rate of interest. an increase in the quantity of money demanded and a decrease in the rate of interest. a decrease in the quantity of money demanded and a decrease in the rate of interest. a decrease in the quantity of money demanded and an increase in the rate of interest. an increase in the quantity of money demanded and an increase in the rate of interest. This is the derived selection under the stated interpretation. an increase in the quantity of money demanded and a decrease in the rate of interest. This alternative fails the selection criterion or distinction explained above. a decrease in the quantity of money demanded and a decrease in the rate of interest. This alternative fails the selection criterion or distinction explained above. a decrease in the quantity of money demanded and an increase in the rate of interest. This alternative fails the selection criterion or distinction explained above.