In the market for money,an interest rate below equilibrium results in an excess ________ money and the interest rate will ________.
A)demand for;rise
B)demand for;fall
C)supply of;fall
D)supply of;rise

Question

Quizplus · Accepted Answer

In a money market, if the interest rate is below the equilibrium, it leads to an excess demand for money because more people want to borrow money at the lower interest rate. As a result, the interest rate will rise to reach the equilibrium where the supply of money equals the demand.

In the Market for Money,an Interest Rate Below Equilibrium Results