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UI Post-UTME Economics 2023 (Model questions) Question 13

Question 13

Money and Inflation

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

  1. A.a fall in the level of prices
  2. B.an increase in the rate of interest
  3. C.a decrease in the rate of interest
  4. D.an increase in the level of income and employment
Show the answer and explanation

Answer: B (an increase in the rate of interest)

Explanation

Interest is the price of money; if demand for money rises while supply is fixed, the interest rate rises.