Prior to January 2000, the demand for money increased as people anticipated Y2K problems. If the Fed took no actions to offset this increase in money demand, then nominal interest rates would _____.

Question

Quizplus · Accepted Answer

If the Fed took no actions to offset the increase in money demand, the increase in demand would result in a decrease in the supply of money. This decrease in money supply would cause nominal interest rates to increase.

Prior to January 2000, the Demand for Money Increased as People