The interest rate will fall when the
A) quantity of money demanded exceeds the quantity of money supplied.
B) quantity of money supplied exceeds the quantity of money demanded.
C) demand for money increases.
D) supply of money decreases.

Question

Quizplus · Accepted Answer

When the quantity of money supplied exceeds the quantity of money demanded, there is an excess supply of money in the economy which leads to a decrease in the interest rate. This is because there is an increase in the supply of loanable funds (money), causing lenders to lower the interest rates to attract borrowers.

The Interest Rate Will Fall When the