Final answer:
A decrease in the stock market can decrease aggregate demand by decreasing consumer wealth. This impacts consumption and can reduce GDP and the price level. Additionally, in the financial market, a rise in the supply of money can lead to a decline in interest rates.
Step-by-step explanation:
A decrease in the stock market can decrease aggregate demand by decreasing consumer wealth. When the value of stocks falls, investors feel less wealthy, which could lead to a decrease in consumption as consumers become less confident about their economic situation. This effect on consumption effectively shifts the AD (Aggregate Demand) curve to the left, resulting in a decrease in the equilibrium level of GDP and possibly leading to a lower price level. Importantly, this market decrease does not directly impact the other options provided such as the price level (which is an outcome, not a direct cause), the stock of existing physical capital, interest rates, or tax revenues; at least not immediately or directly.
Regarding interest rates in the financial market, a rise in supply of money would generally lead to a decline in interest rates. This is because more funds are available for lending, which plays a role in decreasing the cost of borrowing money (the interest rate). Conversely, a fall in supply would increase interest rates, as there is less money available for lending. Therefore, the correct answer for the second part is that a rise in supply of money in the financial market will lead to a decline in interest rates.