# If there is a general shortage of liquidity in the money market then ? with Answer - Economics Mcqs | TestPrep

> Solved MCQ: If there is a general shortage of liquidity in the money market then ? Correct Answer: E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.. Verified answer explanation for FPSC, PPSC, MDCAT, NTS, and CSS competitive exam preparation.

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# If there is a general shortage of liquidity in the money market then ?

Direct Answer & Quick Reference

The correct option is **E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.**.

A. The banks will increase their lending

B. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks

C. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result

D. the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response

E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks. **(Correct Answer)**

✨ Explain with AI

Verified Key: E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.
Solved by 2,868+ students

Verified against official examination board answer keys and standard curriculum textbooks.

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