On any given day,________ changes to achieve equilibrium in the money market.
A)the price level
B)real GDP
C)the nominal interest rate
D)the inflation rate
E)the real interest rate

Question

Quizplus · Accepted Answer

In the money market, supply and demand for money determine the nominal interest rate. If the demand for money exceeds the supply, interest rates will rise until equilibrium is reached. Similarly, if the supply of money exceeds the demand, interest rates will fall until equilibrium is reached. Therefore, the nominal interest rate is the variable that changes to achieve equilibrium in the money market.

On Any Given Day,________ Changes to Achieve Equilibrium in the Money