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Suppose That Households Became Mistrustful of the Banking System and Decide

Question 167

Multiple Choice

Suppose that households became mistrustful of the banking system and decide to decrease their checking accounts and increase their holdings of currency.Using the money demand and money supply model and assuming everything else is held constant,the equilibrium interest rate should


A) increase.
B) decrease.
C) not change.
D) increase,then decrease.

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