If the quantity of money demanded is $100 billion and the quantity of money supplied is $200 billion, then the interest rate will:
A) fall.
B) rise.
C) remain unchanged.
D) be in equilibrium.

Question

Quizplus · Accepted Answer

When the quantity of money demanded is less than the quantity of money supplied, there is an excess supply of money in the market. To get rid of this excess supply, lenders will reduce interest rates, which will encourage borrowers to take more loans, leading to an increase in spending and an increase in the quantity of money demanded. As a result, the interest rate will fall.

If the Quantity of Money Demanded Is $100 Billion and the Quantity