If the quantity of money demanded exceeds the quantity of money supplied then the interest rate will ?
Correct answer: D. rise
- A. change in a certain direction
- B. remain constant
- C. fall
- D. rise
Explanation
When money demand exceeds money supply, people try to obtain money by selling interest-bearing assets. Asset prices fall and the interest rate rises until the money market returns to equilibrium.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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