The money market (short-run) equilibrium equation states that the demand for real balances, (L(i)Y) is always equal to the supply of real balances (M/P) because ____ adjust(s) to ensure that people are willing to hold the entire stock.
A) nominal interest rates
B) real interest rates
C) the price level
D) nominal GDP

Question

Quizplus · Accepted Answer

Nominal interest rates adjust to ensure that the demand for real balances equals the supply, as they influence the opportunity cost of holding money.

The Money Market (Short-Run) Equilibrium Equation States That the Demand