Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Higher bond prices
B
Increased consumer savings
C
Decreased velocity of money
D
Higher interest rates
Understanding the Answer
Let's break down why this is correct
Answer
When there is a decrease in money demand, it usually leads to lower equilibrium interest rates. This happens because people want to hold less cash, so banks have more money to lend out, making borrowing cheaper. Similarly, when there is an increase in the money supply, it means that there is more money available in the economy. This increase can also lead to lower equilibrium interest rates because more money in the system makes it easier for banks to lend, which can encourage spending and investment. For example, if a central bank decides to print more money, businesses may find it easier to get loans, which can stimulate economic growth.
Detailed Explanation
When the money supply goes up, people have more money to spend. Other options are incorrect because Some might think that more money means people save more; Velocity means how fast money moves in the economy.
Key Concepts
Money market dynamics
Interest rates
Economic activity
Topic
Money Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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