If the nominal interest rate is less than the equilibrium nominal interest rate determined in the money market, then in the short run households and firms
A) sell financial assets.
B) buy financial assets.
C) raise the price level.
D) lower the price level.
E) increase real GDP.

Question

Quizplus · Accepted Answer

When the nominal interest rate is below the equilibrium rate, households and firms will sell financial assets to obtain more money, driving the interest rate up towards equilibrium.

If the Nominal Interest Rate Is Less Than the Equilibrium