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If the demand for money increases in the Keynesian Money Market, then both the equilibrium quantity...

If the demand for money increases in the Keynesian Money Market, then both the equilibrium quantity of money supplied and the equilibrium interest rate will rise.

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False
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Answer #1

The money supply curve is a vertical line because the money supply is controlled by the Fed and money demand curve is a negatively sloped curve.

As it can be seen in the diagram, when the demand for money increases from Md1 to Md2, so the equilibrium interest rate increases and equilibrium quantity will remain constant.

Hence the given statement is false because both the equilibrium quantity of money supplied and the equilibrium interest rate will not rise only interest rate rises.

Hence the given statement is false.

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