If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2%, money demanded is _____ than money supplied.
A)less than
B)greater than
C)equal to
D)It is impossible to predict which is greater, money demanded or money supplied.

Question

Quizplus · Accepted Answer

At an interest rate of 2%, which is below the equilibrium rate of 5%, the quantity of money demanded will be greater than the quantity of money supplied, as people will want to hold more money due to the lower opportunity cost of holding money.

If the Equilibrium Interest Rate in the Money Market Is