If the quantity of money supplied is greater than the quantity of money demanded, then the
A) nominal interest rate rises.
B) nominal interest rate falls
C) price of financial assets falls.
D) money supply decreases.
E) price level falls.

Question

Quizplus · Accepted Answer

When the quantity of money supplied is greater than the quantity of money demanded, it creates an excess supply of money. This leads to a decrease in the nominal interest rate as lenders lower their rates to attract borrowers. As a result, the price of financial assets rises as people have more money to invest, leading to higher demand. The money supply does not decrease in this scenario, and the price level does not necessarily fall.

If the Quantity of Money Supplied Is Greater Than the Quantity