It is possible that when the money supply rises,interest rates may ________ if the ________ effect is more than offset by changes in income,the price level,and expected inflation.
A)fall;liquidity
B)fall;risk
C)rise;liquidity
D)rise;risk

Question

Quizplus · Accepted Answer

When the money supply increases, the liquidity effect typically leads to lower interest rates. However, if the increase in money supply also leads to higher income, price levels, and expected inflation, these factors can increase demand for money and push interest rates up, offsetting the liquidity effect.

It Is Possible That When the Money Supply Rises,interest Rates