Supply of money remaining the same when there is an increase in demand for money, there will be
a fall in the level of prices
an increase in the rate of interest
a decrease in the rate of interest
an increase in the level of income and employment
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC IAS – 2013
In the money market, the demand for money (Md) is inversely related to the interest rate, while the supply of money (Ms) is typically considered fixed by the central bank. If the demand for money increases (shifts right) while the supply is fixed, the equilibrium in the money market shifts to a higher interest rate, as people are willing to pay more to hold money or borrow funds.