The interest rate ?
Correct answer: B. is determined in the money market and influences the level of planned investment and thus the goods market
- A. is determined in the goods market and influences the level of planned investment and thus the money market
- B. is determined in the money market and influences the level of planned investment and thus the goods market
- C. is determined in the goods market and has no influences on the money market
- D. is determined in the money market and has no influence on the goods market
Explanation
The interest rate is determined by the interaction of money demand and money supply in the money market. It affects the cost of borrowing, so it changes planned investment and therefore influences the goods market.
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