If the quantity of money demanded exceeds the quantity supplied,
A) the supply-of-money curve will shift to the left.
B) the demand-for-money curve will shift to the right.
C) the interest rate will rise.
D) the interest rate will fall.

Question

Quizplus · Accepted Answer

If the quantity of money demanded exceeds the quantity supplied, there will be excess demand for money leading to increased competition among the borrowers for the limited funds available. As a result, the interest rate will rise in order to balance the demand for and supply of money.

If the Quantity of Money Demanded Exceeds the Quantity Supplied