If at some interest rate the quantity of money demanded is greater than the quantity of money supplied, what will people desire to do and what will happen to the interest rate?
A) People will sell interest-bearing assets, causing the interest rate to decrease.
B) People will sell interest-bearing assets, causing the interest rate to increase.
C) People will buy interest-bearing assets, causing the interest rate to decrease.
D) People will buy interest-bearing assets, causing the interest rate to increase.

Question

Quizplus · Accepted Answer

When the quantity of money demanded exceeds the quantity of money supplied, people will sell interest-bearing assets to obtain more money. This increases the supply of these assets in the market, leading to a decrease in their price and an increase in their yield, which is the interest rate.

If at Some Interest Rate the Quantity of Money Demanded