Asked by
Courtney Simmons
on Dec 17, 2024
Verified
According to liquidity preference theory, if there were a surplus of money, then
A) the interest rate would be above equilibrium and the quantity of money demanded would be too large for equilibrium.
B) the interest rate would be above equilibrium and the quantity of money demanded would be too small for equilibrium.
C) the interest rate would be below equilibrium and the quantity of money demanded would be too small for equilibrium.
D) the interest rate would be below equilibrium and the quantity of money demanded would be too large for equilibrium.
Surplus of Money
Situation where the supply of money in an economy exceeds the demand for it, often leading to lower interest rates and inflation.
Interest Rate
The percentage of a sum of money charged for its use, typically expressed on an annual basis.
Equilibrium
A state in which market supply and demand balance each other, and as a result, prices become stable.
- Illustrate the impact of money supply fluctuations on money market equilibrium.
Verified Answer
TD
Learning Objectives
- Illustrate the impact of money supply fluctuations on money market equilibrium.