A decrease in confidence in stocks and bonds will lead households to shift their portfolios.As far as the money market is concerned,this development raises money ______ and ______ the equilibrium interest rate.
A) demand; raises
B) demand; lowers
C) supply; raises
D) supply; lowers

Question

Quizplus · Accepted Answer

A decrease in confidence in stocks and bonds will lead households to hold more money instead of investing in these assets, increasing the demand for money. This increased demand for money raises the equilibrium interest rate.

A Decrease in Confidence in Stocks and Bonds Will Lead