What Happens in the Money Market When There Is a Decrease

question 137

Multiple Choice

What happens in the money market when there is a decrease in the supply of money?

• A) The equilibrium quantity of money increases and the equilibrium interest rate increases.
• B) The equilibrium quantity of money increases and the equilibrium interest rate decreases.
• C) The equilibrium quantity of money decreases and the equilibrium interest rate increases.
• D) The equilibrium quantity of money decreases and the equilibrium interest rate decreases.

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Definitions:

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including charges like lease payments, wage bills, and insurance fees.

Net Income

The total profit of a company after all expenses, including taxes and operational costs, have been deducted from total revenue.

Variable Costs

Expenses that vary directly with the level of production or service delivery.

Fixed Costs

Fixed outgoings, including rent, salaries, and insurance, that are unaffected by production or sales volumes.