If the supply of money is stable while the demand for money is volatile, the likely result will be that:
A) interest rates will remain constant.
B) inflation rates will remain constant.
C) interest rates will become more volatile.
D) the velocity of money will fall.

Question

Quizplus · Accepted Answer

If the demand for money is volatile while the supply is stable, then changes in demand will create changes in the price of money (i.e. interest rates). As a result, interest rates will become more volatile, attempting to equate the demand for and supply of money. This could have implications for the broader economy and financial markets.

If the Supply of Money Is Stable While the Demand