In the money market, if the nominal interest rate is below the equilibrium level,
A) the quantity of money demanded exceeds the quantity of money supplied.
B) the supply of money curve will shift leftward.
C) asset prices will rise.
D) the demand for money curve will shift leftward.
E) the quantity of money supplied exceeds the quantity of money demanded.

Question

Quizplus · Accepted Answer

When the nominal interest rate is below the equilibrium level, it means that the cost of borrowing is relatively low, leading to an increase in the demand for money. As a result, the quantity of money demanded exceeds the quantity of money supplied at this lower interest rate.

In the Money Market, If the Nominal Interest Rate Is