A change in financial technology that reduces the need to hold cash balances ________ the demand for money and ________ the equilibrium nominal interest rate.
A) decreases; lowers
B) increases; lowers
C) increases; raises
D) decreases; raises
E) decreases; does not change

Question

Quizplus · Accepted Answer

A reduction in the need to hold cash balances decreases the demand for money. With lower demand for money, the equilibrium nominal interest rate also decreases, as there is less competition for available funds.

A Change in Financial Technology That Reduces the Need to Hold