In the money market, if the quantity of money supplied exceeds the quantity of money demanded, the nominal interest rate will ________ and the prices of assets will ________.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease
E) fall; not change

Question

Quizplus · Accepted Answer

If the quantity of money supplied exceeds the quantity of money demanded in the money market, there will be an excess supply of money. This will cause the nominal interest rate to fall as lenders try to entice borrowers to take out loans. Additionally, the prices of assets will increase as borrowers invest the excess money in assets, causing their prices to rise.

In the Money Market, If the Quantity of Money Supplied