Using the money demand and money supply model, an increase in money demand would cause the equilibrium interest rate to
A)increase.
B)decrease.
C)not change.
D)increase, then decrease.

Question

Quizplus · Accepted Answer

An increase in money demand would cause an increase in the equilibrium interest rate. This is because, with higher demand for money, the demand curve for money shifts to the right, causing an increase in the interest rate required to balance the demand for and supply of money.

Using the Money Demand and Money Supply Model, an Increase