Other things equal, if there is an excess demand for money, the interest rate may rise.

Question

Quizplus · Accepted Answer

When there is excess demand for money, meaning people want to hold more cash than what is available, the price of money (the interest rate) may rise, as lenders will try to capitalize on the increased demand by charging higher interest rates. This helps to reduce the demand for money by making it more expensive to borrow. Therefore, the statement is true.

Other Things Equal, If There Is an Excess Demand for Money