If There Is an Excess Supply of Money

question 28

Multiple Choice

If there is an excess supply of money

• A) the interest rate falls.
• B) the interest rate rises.
• C) the real money supply shifts left to make an equilibrium.
• D) the real money supply shifts right to make an equilibrium.
• E) the interest rate stays constant, but consumer confidence falters.

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Definitions:

Monopolistically Competitive

describes a market structure where many firms sell products that are similar but not identical, allowing for competition.

Average Total Cost

The total cost divided by the quantity of output produced; it includes both fixed and variable costs.

Long-Run Equilibrium

A state in which all firms in a perfectly competitive market earn zero economic profits, indicating no incentive for entry or exit.

Monopolistically Competitive

Describes a market structure where many firms offer products that are similar but not perfect substitutes, leading to competition based on product differentiation.