The beginning of the global COVID-19 pandemic in March 2020 created an enormous amount of uncertainty-about the health of populations as well as the impact on national economies. The heightened uncertainty led portfolio managers around the world to increase their demand for liquid assets-cash. a. Using the model of the money market, this uncertainty leads to an increase in money demand and an increase in the interest rate. b. Governments and central banks may have wanted to prevent the change in interest rates described in part (a) mainly because that change would likely lead to a reduction in aggregate demand , which could lead to a decrease in economic growth or real GDP c. Given the theory of money demand, in order to keep interest rates stable, central banks could respond to this situation by directly decreasing demand for money decreasing the supply of money decreasing demand for money increasing the supply of money decreasing government spending increasing demand for money decreasing the price level increasing government spending increasing the price level