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 fall.
D)the interest rate will rise.

Question

Quizplus · Accepted Answer

When the quantity of money demanded exceeds the quantity supplied, it means there is excess demand for money in the market. This leads to an increase in the interest rate, which in turn reduces the quantity of money demanded and increases the quantity of money supplied until the market clears. Therefore, the correct answer is D, the interest rate will rise.

If the Quantity of Money Demanded Exceeds the Quantity Supplied