Suppose that the demand and supply of money are initially in equilibrium,and that the demand for money increases.A monetary authority interested in keeping the money supply constant and the interest rate low must
A)increase the money supply
B)decrease the money supply
C)increase the demand for money
D)decrease the demand for money
E)give up pursuing both goals at the same time and choose one or the other

Question

Quizplus · Accepted Answer

Keeping the money supply constant while also keeping interest rates low is not possible if the demand for money increases, as this would typically lead to higher interest rates. The authority must choose between maintaining the money supply or keeping interest rates low.

Suppose That the Demand and Supply of Money Are Initially