Other things constant, a decrease in the monetary base will lead to:
A) a reduction in the equilibrium interest rate and an increase in the equilibrium quantity of money balances held.
B) an increase in the equilibrium interest rate and a reduction in the equilibrium quantity of money balances held.
C) no change in the equilibrium interest rate but a decrease in the equilibrium quantity of money balances held.
D) an increase in the equilibrium interest rate but no change in the equilibrium quantity of money balances held.
Correct Answer:
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