For the following questions, consult the diagram below.
Figure 15-1
-Refer to Figure 15-1. At an interest rate of 4 percent, how much is the excess money demand or supply?
A) There is an excess money demand equal to the distance between a and b.
B) There is an excess money demand equal to the distance between b and c.
C) There is an excess money supply equal to the distance between b and a.
D) There is an excess money supply equal to the distance between c and b.

Question

For the following questions, consult the diagram below.
Figure 15-1 
-Refer to Figure 15-1. At an interest rate of 4 percent, how much is the excess money demand or supply?
A) There is an excess money demand equal to the distance between a and b. 
B) There is an excess money demand equal to the distance between b and c. 
C) There is an excess money supply equal to the distance between b and a. 
D) There is an excess money supply equal to the distance between c and b.

Quizplus · Accepted Answer

At an interest rate of 4 percent, the equilibrium interest rate would be at point b. However, the quantity of money demanded at point b is lower than the quantity of money supplied, resulting in an excess money supply. The distance between point b and point a represents the excess money supply. Therefore, choice C is the correct answer.

For the Following Questions, Consult the Diagram Below