In the money market, if the quantity of money supplied exceeds the quantity of money demanded, the nominal interest rate will ________ and the prices of assets will ________.
A) rise; increase
B) fall; decrease
C) rise; decrease
D) fall; increase
E) fall; not change

Question

Quizplus · Accepted Answer

When the quantity of money supplied exceeds the quantity of money demanded, the nominal interest rate will fall due to the excess supply of money. Lower interest rates make borrowing cheaper, which can increase the demand for assets and thus their prices tend to increase.

In the Money Market, If the Quantity of Money Supplied