If the money market is in equilibrium,

Question

Quizplus · Accepted Answer

When the money market is in equilibrium, it implies that the demand for money equals the supply of money. This condition does not directly determine the relationship between inflation rates and interest rates (nominal or real). Instead, it suggests that there is a balance in the liquidity preferences and the availability of money, which can influence other markets, including the nonmoney asset market, to also reach equilibrium. The equilibrium in the money market does not necessarily mean that the inflation rate equals the nominal or real interest rate, nor does it directly imply that the goods market is in equilibrium.

If the Money Market Is in Equilibrium