Sia
Question
Statistics
Posted 9 months ago
If a new technology is invented that makes it easier to withdraw money from the bank, which of the following will occur in the money market?
Choose 1 answer:
(A) The demand for money increases and the nominal interest rate decreases.
(B) The demand for money decreases and the nominal interest rate decreases.
(C) The demand for money increases and the nominal interest rate doesn't change.
D The demand for money increases and the nominal interest rate increases.
(E) The demand for money decreases and the nominal interest rate increases.
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Answer from Sia
Posted 9 months ago
Solution by Steps
step 1
When a new technology makes it easier to withdraw money from the bank, people are likely to hold less money in cash because they can access it more easily. This reduces the demand for money
step 2
With a decrease in the demand for money, the nominal interest rate is likely to decrease because there is less competition for available funds
step 3
Therefore, the correct answer is that the demand for money decreases and the nominal interest rate decreases
B
Key Concept
Impact of technology on money demand and interest rates
Explanation
Easier access to money reduces the demand for holding cash, leading to lower nominal interest rates.
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