Which of the following events will lead to a decrease in the equilibrium interest rate ?
Correct answer: D. A decrease in the price level
- A. A sale of government securities by the central bank
- B. An increase in the level of aggregate output
- C. An increase in the discount rate
- D. A decrease in the price level
Explanation
A lower price level increases real money balances, shifting the money-market balance toward a lower interest rate. Selling securities, higher output, and a higher discount rate generally put upward pressure on interest rates.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
The motive for holding money that encourages investors to hold bonds when interest rates are low, with the hope of selling them when interest rates are high, is the ?
The demand for money represents the idea that there is ?
The equilibrium level of aggregate output is determined in ?
When economies speak of the demand for money which of the following are they asking ?
Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?
Which of the following activities is one of the responsibilities of the Bank of England to the banking system ?