Q505
If equilibrium interest rate increases and curve of funding supplied shifts to left then impact on spending is
A.
increase in near term
AnswerB.
decrease in near term
C.
increase in long term
D.
decrease in long term
Answer: Option A
Solution
Answer: Option A
Solution:
If equilibrium interest rate increases and curve of funding supplied shifts to left then impact on spending is increase in near term. The equilibrium interest rate is the rate at which the quantity of money demanded is equal to the quantity of money supplied. The Federal Reserve can alter the equilibrium interest rate by adjusting the supply of money. The demand for money and supply of money can be graphed to determine the equilibrium interest rate.