How is the equilibrium interest rate determined?
A) by the price of money
B) by the demand for money alone
C) by the supply of money alone
D) by the supply of money and by the demand for money

Question

How is the equilibrium interest rate determined?  
A) by the price of money 
B) by the demand for money alone 
C) by the supply of money alone 
D) by the supply of money and by the demand for money

Quizplus · Accepted Answer

The equilibrium interest rate is determined by both the supply of money and the demand for money. The supply of money is controlled by the central bank through monetary policy, while the demand for money depends on factors such as the level of economic activity and inflation expectations. These two forces come into balance at the equilibrium interest rate, which is where the quantity of money supplied equals the quantity of money demanded.

How Is the Equilibrium Interest Rate Determined