Figure 15-1
-Refer to the Figure 15-1.What is most likely to happen if the interest rate is equal to 4?
A) There is excess demand for money,and the interest rate will fall.
B) There is excess supply of money,and the interest rate will rise.
C) There is excess demand for money,and the interest rate will rise.
D) There is an excess supply of money,and the interest rate will fall.

Question

Figure 15-1 
-Refer to the Figure 15-1.What is most likely to happen if the interest rate is equal to 4?
A) There is excess demand for money,and the interest rate will fall. 
B) There is excess supply of money,and the interest rate will rise. 
C) There is excess demand for money,and the interest rate will rise. 
D) There is an excess supply of money,and the interest rate will fall.

Quizplus · Accepted Answer

According to the diagram, when the interest rate is equal to 4, the supply of money (MS) is greater than the demand for money (MD), creating an excess supply of money. In this situation, people will start to invest in other assets, causing the interest rate to fall until the equilibrium is restored. Therefore, the best choice is D because there is an excess supply of money, and the interest rate will fall.

Figure 15-1 -Refer to the Figure 15-1.What Is Most Likely to Happen