Other things the same, which of the following happens if the price level falls?
A)Money demand shifts rightward.
B)Initially there is an excess demand for money in the money market.
C)The interest rate falls.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

When the price level falls, the demand for money decreases because people need less money to purchase goods and services. As a result, the demand for money curve shifts leftward. The supply of money remains constant, leading to an excess supply of money in the money market. To restore equilibrium, the interest rate falls.

Other Things the Same, Which of the Following Happens If