If the actual interest rate in the money market is higher than the equilibrium interest rate, there would be an excess supply of money.

Question

Quizplus · Accepted Answer

When the actual interest rate is higher than the equilibrium interest rate, it means that the cost of borrowing is more expensive than what would be expected at equilibrium. This discourages borrowing and encourages saving, leading to less demand for money and an excess supply of money as people hold onto their cash rather than spending or investing it.

If the Actual Interest Rate in the Money Market Is