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Science & Technology·2013·Medium

Supply of money remaining the same when there is an increase in demand for money, there will be

Supply of money remaining the same when there is an increase in demand for money, there will be

Options

  1. a.

    A fall in the level of prices

  2. b.

    An increase in the rate of interest

    Correct answer
  3. c.

    A decrease in the rate of interest

  4. d.

    An increase in the level of income and employment

Explanation

Supply remaining the same, increase in demand for money will lead to more options to lend money for the banks. Thus, banks will lend money at greater rate of interest to earn more money as there are more customers for the same amount of money.

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