Equilibrium in the money market occurs when
A) the quantity of money demanded equals the quantity of money supplied.
B) the quantity of money demanded is less than the quantity of money supplied.
C) the quantity of money demanded is more than the quantity of money supplied.
D) the interest rate equals the money supply.

Question

Quizplus · Accepted Answer

Equilibrium in the money market occurs when the quantity of money demanded equals the quantity of money supplied. At this point, there is no excess demand or excess supply of money, and the interest rate is stable. In other words, the money market is in equilibrium when the demand for money (by households, firms, and government) is equal to the money supply (by the central bank).

Equilibrium in the Money Market Occurs When