In the long run, the _____ adjusts to equilibrate the quantity of money supplied with the quantity demanded.
A) real interest rates
B) money supply
C) price level
D) nominal interest rates

Question

In the long run, the _____ adjusts to equilibrate the quantity of money supplied with the quantity demanded. 
A) real interest rates
B) money supply
C) price level
D) nominal interest rates

Quizplus · Accepted Answer

In the long run, the price level adjusts to bring the quantity of money supplied in line with the quantity demanded, which ensures that the nominal value of money in the economy remains relatively stable. Real interest rates and nominal rates can fluctuate in response to changes in supply and demand, but they are not the primary mechanism by which the quantity of money is equilibrated. While changes in the money supply may impact the price level and other macroeconomic variables in the short-run, in the long run it is the price level that adjusts to bring the quantity of money supplied and demanded into balance.

In the Long Run, the _____ Adjusts to Equilibrate the Quantity