If the quantity of money demanded is greater than the quantity supplied then,in the short run,the
A)price of financial assets rises.
B)nominal interest rate falls.
C)nominal interest rate rises.
D)price level rises.
E)demand for financial assets increases.

Question

Quizplus · Accepted Answer

If the quantity of money demanded is greater than the quantity supplied, then there is excess demand for money. This will lead to an increase in the nominal interest rate as individuals and firms compete to borrow money from the limited supply. The higher interest rate will then discourage some individuals and firms from borrowing, and this will ultimately lead to a decrease in the demand for money, bringing the market into equilibrium.

If the Quantity of Money Demanded Is Greater Than the Quantity