In the money market, in the short run in order to decrease the nominal interest rate, the Reserve Bank must
A) decrease the demand for money.
B) directly lower the interest rate and not change either the demand for money or the supply of money.
C) increase the discount rate.
D) increase the quantity of money.
E) decrease the quantity of money.

Question

Quizplus · Accepted Answer

To decrease the nominal interest rate in the short run, the Reserve Bank can increase the quantity of money. This action increases the supply of money in the economy, leading to lower interest rates as there is more money available for borrowing.

In the Money Market, in the Short Run in Order