A decrease in the supply of money with no change in demand for money will lead to a(n) _____ in the equilibrium quantity of money and a _____ in the equilibrium interest rate.
A) increase; rise
B) increase; fall
C) decrease; rise
D) decrease; fall

Question

Quizplus · Accepted Answer

A decrease in the supply of money with no change in demand for money will result in a decrease in the equilibrium quantity of money, as there is less money available for borrowing and lending. This will lead to a rise in the equilibrium interest rate, as lenders will demand a higher return on their loans due to the scarcity of available funds.

A Decrease in the Supply of Money with No Change