Using our simple model of the money market suppose two things happen: 1. The monetary authorities decrease the money supply 2. Real national income (Y) decreases The equilibrium interest rate (R) will:
a. always increase.
b. always decrease.
c. increase as long as the change in the money supply is greater than the change Y.
d. decrease as long as the change in the money supply is greater than the change Y.
e. it is not possible to determine with the available information.