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What is the effect of decrease in income on the interest rate?

      

What is the effect of decrease in income on the interest rate?

  

Answers


Dana
If the income falls, with money supply constant, the transactions balances held by the people will exceed the desired levels. The surplus balance is used to purchase securities. This leads to bond prices rising and interest rates falling. This continues until all the transactions money balances are converted into speculative money balances

Dana05 answered the question on August 14, 2019 at 07:27


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