A decrease in the supply of money with no change in demand for money will lead to a decrease in the equilibrium quantity of money and an increase in the equilibrium interest rate. Thus, option C is correct.
Equilibrium is the set of economic factors like price and quantity that the market is driven by, and the fluctuation in the market happens because of that. It determines the standard basis of the demand and supply in the market economy.
It is crucial to find an equilibrium as it is the defining part of the break-even point of the business.
As the money supply decreases, the demand for the commodity will also decrease, which will lead to an increase in the equilibrium of interest rate as people will have less money to spend. Therefore, option C is the correct option.
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The question is incomplete, the options are:
a) no change; an increase
b) no change; a decrease
c) a decrease; an increase
d) an increase; a decrease
