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Suppose an event has occurred that has decreases money demand. This will cause the equilibrium interest rate to g

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anthougo anthougo

20-01-2021

Complete Question:

Suppose an event has occurred that has decreased money demand. This will cause the equilibrium interest rate to: Multiple Choice decrease, but equilibrium quantity to remain constant. decrease, but equilibrium quantity to increase. increase, but equilibrium quantity to decrease. Increase, but equilibrium quantity to remain constant.

Answer:

Suppose an event has occurred that has decreased money demand. This will cause the equilibrium interest rate to:

decrease, but equilibrium quantity to increase.

Explanation:

Money demand equilibrium occurs at the interest rate at which the quantity of money demanded equals the quantity of money supplied. This implies that all other things unchanged, a shift in money demand will lead to a change in the equilibrium interest rate. This result will come about because with the reduced interest rate, more consumers and businesses will be angling for more loans.

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