When the quantity of money demanded is less than the quantity of money supplied:

Question

Quizplus · Accepted Answer

When the quantity of money demanded is less than the quantity of money supplied, there is an excess supply of money in the market which leads to a decrease in interest rates. This is because lenders will lower their interest rates to encourage borrowing and investment, which in turn increases demand for money and decreases the excess supply.

When the Quantity of Money Demanded Is Less Than the Quantity