In the money market,a condition of excess demand for money can be eliminated by a ________ in aggregate output or a ________ in the interest rate,everything else held constant.
A)rise;rise
B)rise;fall
C)fall;rise
D)fall;fall

Question

Quizplus · Accepted Answer

Excess demand for money means that people want to hold more money than what is available in the economy. In order to balance this excess demand, the interest rate needs to rise so that people are less willing to hold money and more willing to lend it out. Alternatively, the aggregate output can fall so that there is less demand for money in the economy. Therefore, the correct answer is (C) fall; rise.

In the Money Market,a Condition of Excess Demand for Money