If the demand for money increases, but the Fed keeps the money supply the same:
A)nominal interest rates will rise and aggregate demand will fall.
B)nominal interest rates will rise and aggregate demand will rise.
C)nominal interest rates will fall and aggregate demand will fall.
D)nominal interest rates will fall and aggregate demand will rise.

Question

If the demand for money increases, but the Fed keeps the money supply the same:
A)​nominal interest rates will rise and aggregate demand will fall.
B)​nominal interest rates will rise and aggregate demand will rise.
C)​nominal interest rates will fall and aggregate demand will fall.
D)​nominal interest rates will fall and aggregate demand will rise.

Quizplus · Accepted Answer

When the demand for money increases but the money supply remains the same, the interest rates will rise in order to equate the demand for and supply of money. This increase in interest rates will lead to lower investment and consumption spending, causing a decrease in aggregate demand.

If the Demand for Money Increases, but the Fed Keeps