In the money market, the demand and supply of money determine the equilibrium:

Question

Quizplus · Accepted Answer

The nominal interest rate is determined by the demand and supply of money in the money market. As the demand for money increases, the nominal interest rate also increases, and vice versa. Therefore, A is the correct choice. The mortgage interest rate, real interest rate, and inflation rate are affected by various other factors and are not solely determined by the money market.

In the Money Market, the Demand and Supply of Money