If the demand for money and the supply of money both increase, then the new equilibrium:
A) quantity of money and the interest rate will both increase.
B) quantity of money and the interest rate will both decrease.
C) quantity of money will increase, but the change in the interest rate cannot be predicted.
D) interest rate will increase, but the change in the interest rate cannot be predicted.

Question

Quizplus · Accepted Answer

When both the demand and supply of money increase, the quantity of money will definitely increase, but the effect on the interest rate is uncertain as it depends on the relative magnitudes of the shifts in demand and supply.

If the Demand for Money and the Supply of Money