This Question: 1 pt 34 of 40 (0 complete) If the economy is currently in monetar

Question

This Question: 1 pt 34 of 40 (0 complete) If the economy is currently in monetary equilibrium, an increase in the money supply will A. cause an excess demand for money and a decrease in the rate of interest. O B. cause a reduction in the demand for money, leading to a higher rate of interest. O c. not change the equilibrium conditions. D. lead to a movement down the money demand curve to a lower rate of interest. cause an increase in the demand for money, leading to a lower rate of interest. O E,

Explanation / Answer

(1) (D)

(2) (B)

By holding money, an investor foregoes the potential interest he could earn from bonds.

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