A decrease in money supply will result in a(n)________ in the quantity of money demanded and cause the nominal interest rate to ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase

Question

Quizplus · Accepted Answer

A decrease in the money supply typically leads to an increase in the nominal interest rate. This is because with less money available, the cost of borrowing (interest rate) increases as people compete for the limited funds.

A Decrease in Money Supply Will Result in A(n)________ in the Quantity