When the feedback effects from income to the money market are included,

Question

Quizplus · Accepted Answer

Including feedback effects from income to the money market means that the demand for money is affected by income changes. As income increases, people demand more money to finance their spending, and this increases the interest rate. Therefore, a given increase in the money supply will cause a smaller change in the interest rate because some of the money supplied will be absorbed by the increased demand due to higher income levels.

When the Feedback Effects from Income to the Money Market