When the interest rate falls in the money market, the quantity of money demanded__________ and the quantity of money supplied__________ .
A) decreases; increases
B) increases; decreases
C) stays the same; decreases
D) increases; stays the same

Question

Quizplus · Accepted Answer

When interest rates fall, people are more likely to hold onto cash rather than invest it, increasing the quantity of money demanded. The quantity of money supplied is typically controlled by the central bank and does not change with interest rates in the short term.

When the Interest Rate Falls in the Money Market, the Quantity