An increase in the demand for money, combined with an 'easy' monetary policy on the part of the Bank of England, will have an uncertain effect on the equilibrium interest rate.

Question

Quizplus · Accepted Answer

An increase in money demand tends to raise interest rates, while an easy monetary policy, which increases money supply, tends to lower them. The net effect on interest rates depends on the relative magnitudes of these changes.

An Increase in the Demand for Money, Combined with an 'Easy