In the Keynesian model, if interest rates fall below what people consider normal, households will respond by
A) decreasing the saving rate.
B) reducing the saving rate.
C) holding more money.
D) holding more bonds.

Question

Quizplus · Accepted Answer

When interest rates fall below what people consider normal, households are more likely to hold more money because the opportunity cost of holding money (in terms of forgone interest) is lower.

In the Keynesian Model, If Interest Rates Fall Below What