If the nominal interest rate is less than the equilibrium nominal interest rate determined in the money market then, in the short run, households and firms
A) lower the price level.
B) increase real GDP.
C) raise the price level.
D) buy financial assets.
E) sell financial assets.

Question

Quizplus · Accepted Answer

When the nominal interest rate is below the equilibrium rate, households and firms will sell financial assets to obtain more money, driving the interest rate up towards equilibrium.

If the Nominal Interest Rate Is Less Than the Equilibrium