Which of the following events will lead to an increase in the equilibrium interest rate?

Question

Quizplus · Accepted Answer

An increase in the level of nominal aggregate output will lead to an increase in the demand for credit, causing an increase in the equilibrium interest rate.

Answer: D
 The purchase of government securities by the Federal Reserve causes an increase in the money supply, leading to a decrease in the equilibrium interest rate. Therefore, this option is incorrect.

Option A is incorrect because a decrease in the level of nominal aggregate output will result in a decrease in the demand for credit, causing a decrease in the equilibrium interest rate.

Option B is also incorrect because a decrease in the discount rate will lead to a decrease in the cost of borrowing, leading to a decrease in the equilibrium interest rate.

Which of the Following Events Will Lead to an Increase