A recent study shows that consumer preference is shifting towards using credit cards due to a significant decrease in credit card fees. How is this shift likely to affect the demand for physical cash and the nominal interest rates in the economy?

When consumers prefer using credit cards because of lower fees, they will likely use cash less often. This means the demand for physical cash will decrease, as people find it more convenient to pay with cards. When demand for cash goes down, it can lead to lower nominal interest rates because banks have more cash available to lend, making borrowing cheaper. For example, if a lot of people start using credit cards to make their purchases instead of taking out cash, banks might lower interest rates to encourage more borrowing and spending. Overall, this shift can change how money is used in the economy, influencing both cash demand and interest rates.