Assume the Money Market Is Initially in Equilibrium

question 39

Multiple Choice

Assume the money market is initially in equilibrium. If the price level decreases, according to liquidity-preference theory, what is in excess and for how long?

• A) The supply of money is in excess until the interest rate increases.
• B) The supply of money is in excess until the interest rate decreases.
• C) The demand for money is in excess until the interest rate increases.
• D) The demand for money is in excess until the interest rate decreases.

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Definitions:

Consumption

The use of goods and services by households, an activity that provides utility to consumers and drives demand in the economy.

Borda Count

A voting system where voters rank options in order of preference, and options are awarded points based on their rank position in each vote.

Candidates

Individuals who are considered for a position, role, or opportunity, often in the context of elections, job openings, or competitions.

Voters

Individuals who are eligible and participate in an election process to choose representatives or make decisions in referenda.