Below the equilibrium level of nominal interest rates, there is a _______ of money and money interest rates will tend to _____ as a result.
A)Shortage; fall.
B)Shortage; rise.
C)Surplus, fall.
D)Surplus; rise.

Question

Below the equilibrium level of nominal interest rates, there is a _______ of money and money interest rates will tend to _____ as a result.
A)​Shortage; fall.
B)​Shortage; rise.
C)​Surplus, fall.
D)​Surplus; rise.

Quizplus · Accepted Answer

Below the equilibrium level of nominal interest rates, there is a shortage of money, and as a result, money interest rates will tend to rise. This is because when the demand for money exceeds the supply (a shortage), the cost of borrowing money (interest rates) increases.

Below the Equilibrium Level of Nominal Interest Rates, There Is