If the nominal interest increases, then:
A) the money supply increases.
B) the money supply decreases.
C) the demand for money increases.
D) the demand for money decreases.

Question

Quizplus · Accepted Answer

An increase in nominal interest rates means that borrowing money becomes more expensive, which reduces the incentive for consumers and businesses to take out loans. This leads to a decrease in the demand for money, as fewer people want to borrow money.

If the Nominal Interest Increases, Then