If the demand for money is $300 billion and the supply of money is $200 billion, then the interest rate will:

Question

Quizplus · Accepted Answer

When the demand for money is greater than the supply of money, there is a shortage of money. This shortage causes the interest rate to rise as borrowers are willing to pay more to borrow money, while lenders can charge higher interest rates to make up for the scarcity. Therefore, in this scenario, the interest rate will rise.

If the Demand for Money Is $300 Billion and the Supply