An increase in the demand for money, combined with sales of government securities to the public, will tend to raise interest rates.

Question

Quizplus · Accepted Answer

An increase in the demand for money, while the supply remains constant or decreases due to the sale of government securities (which takes money out of circulation), will lead to higher interest rates as borrowers are willing to pay more for the now scarcer money.

An Increase in the Demand for Money, Combined with Sales