If the amount of money demanded exceeds the amount supplied, the
A) demand-for-money curve will shift to the left.
B) money-supply curve will shift to the right.
C) interest rate will rise.
D) interest rate will fall.

Question

Quizplus · Accepted Answer

If the amount of money demanded exceeds the amount supplied, there will be excess demand for money which will lead to an increase in the interest rate in order to restore equilibrium in the money market. Therefore, the correct choice is C, as the interest rate will rise.

If the Amount of Money Demanded Exceeds the Amount Supplied