The interest rate will fall when the:
A) Quantity of money demanded exceeds the quantity of money supplied
B) Quantity of money supplied exceeds the quantity of money demanded
C) Demand for money increases
D) Supply of money decreases

Question

Quizplus · Accepted Answer

When the quantity of money supplied exceeds the quantity of money demanded, there is an excess supply of money in the economy. In order to reduce the excess supply, suppliers will lower the interest rate to encourage more people to borrow money and stimulate demand. As a result, the interest rate will fall.

The Interest Rate Will Fall When The