If the quantity of money supplied exceeds the quantity of money demanded at a given point in time, _____
A) the price level in the economy will fall.
B) the equilibrium interest rate will increase.
C) the equilibrium interest rate will fall.
D) the money demand curve will shift to the right.
E) the money demand curve will shift to the left.

Question

Quizplus · Accepted Answer

When the quantity of money supplied exceeds the quantity of money demanded, the surplus of money leads to lower interest rates as banks and other financial institutions try to encourage borrowing and spending to utilize the excess money. This is because, with more money available than people want to hold, the price of borrowing money (the interest rate) decreases to balance supply and demand.

If the Quantity of Money Supplied Exceeds the Quantity of Money