If the amount of money demanded exceeds the amount supplied, it can be expected that the:
A)demand-for-money curve will shift to the left.
B)money supply curve will shift to the right.
C)interest rate will rise.
D)interest rate will fall.

Question

Quizplus · Accepted Answer

If the amount of money demanded exceeds the amount supplied, there will be an excess demand for money, leading to an increase in the interest rate as individuals bid up the price of money to acquire the scarce commodity. Therefore, the correct option is C, i.e., the interest rate will rise.

If the Amount of Money Demanded Exceeds the Amount Supplied