If the quantity of money demanded is greater than the quantity supplied, then in the short run the
A) demand for financial assets increases.
B) nominal interest rate falls.
C) nominal interest rate rises.
D) price of financial assets rises.
E) price level rises.

Question

Quizplus · Accepted Answer

If the quantity of money demanded is greater than the quantity supplied, there is excess demand for money, which puts upward pressure on the nominal interest rate. As a result, the nominal interest rate rises in the short run to bring the money market into equilibrium.

If the Quantity of Money Demanded Is Greater Than the Quantity