An excess demand for money exists if the interest rate is below the equilibrium rate.

Question

Quizplus · Accepted Answer

An excess demand for money means that people want to hold more money than is available in the economy. This leads to an increase in demand for money, which in turn increases the interest rate. Therefore, if the interest rate is below the equilibrium rate, it indicates that there is still excess demand for money, and people are willing to pay a higher interest rate to hold onto their money.

An Excess Demand for Money Exists If the Interest Rate