In a market for money, it is typically the case that we use the ________ in a supply and demand model.
A)inflation rate
B)interest rate
C)wage rate
D)monetary index

Question

Quizplus · Accepted Answer

The interest rate is typically used in a supply and demand model for money as it represents the cost of borrowing or the return on savings. An increase in the interest rate will reduce the demand for money as borrowing becomes more expensive, while increasing the supply of money as savings become more attractive. Conversely, a decrease in the interest rate will increase the demand for money as borrowing becomes cheaper and the supply of money decreases as savings become less attractive.

In a Market for Money, It Is Typically the Case