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Sagot :
An increase in the money supply increases the equilibrium interest rate and lowers the aggregate demand .its True.
Set money demand equal to money supply and solve for r to determine the equilibrium real interest rate (r), which is the short-term real interest rate that, over the long run, is consistent with aggregate production at potential and stable inflation. So, 1400 plus (10/r) is 1500 or r =. Remember that the interest rate is inversely connected to the price of bonds, so when the equilibrium bond price increases, the equilibrium interest rate decreases. The equilibrium interest rate rises, on the other hand, if the equilibrium bond price falls.
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