In the money market,in the short run if the quantity of money exceeds the quantity of money demanded,then to achieve equilibrium the
A)demand for money increases.
B)price level rises.
C)inflation rate increases.
D)supply of money increases.
E)nominal interest rate falls.

Question

Quizplus · Accepted Answer

In the short run, if the quantity of money exceeds the quantity of money demanded, then there is an excess supply of money in the market. To achieve equilibrium, the nominal interest rate will fall as people try to dispose of the excess money in order to earn interest. This decrease in the nominal interest rate leads to an increase in the demand for money, and the market eventually reaches equilibrium where the quantity of money demanded equals the quantity of money supplied.

In the Money Market,in the Short Run If the Quantity