Which of the following changes is most likely to happen when there is a decrease in the supply of money in a market that was initially in equilibrium?
A)The demand for money increases
B)Planned investment spending increases
C)Interest rate increases
D)Aggregate expenditure increases
E)The demand for money decreases

Question

Quizplus · Accepted Answer

When there is a decrease in the supply of money in a market that was initially in equilibrium, the demand for money will exceed the supply, leading to an increase in interest rates as borrowers compete for the reduced pool of funds available. This increase in interest rates will discourage planned investment spending and may ultimately lead to a decrease in aggregate expenditure. Therefore, the correct choice is C.

Which of the Following Changes Is Most Likely to Happen