Using our little money market model, the interest rate increases if

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Business

Natasha Shelton

9 February, 10:15

Using our little money market model, the interest rate increases if

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Isabela Swanson · Answer 1

The interest rate increases if there is a rise in inflation rate.

When inflation rate is on the rise, the purchasing power that held by consumers will be lower in value.

Because of this, interest rates will be increased so people will put their money in the bank and reduce the total money circulation that spread in the market, which will lower the infation