If the Amount of Money Demanded Exceeds the Amount Supplied

question 142

Multiple Choice

If the amount of money demanded exceeds the amount supplied, it can be expected that the:

• A)demand-for-money curve will shift to the left.
• B)money supply curve will shift to the right.
• C)interest rate will rise.
• D)interest rate will fall.

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Definitions:

International Fisher Effect

A theory that describes the relationship between interest rates and currency exchange rates, asserting that differences in interest rates between two countries will result in an equal change in exchange rates.

Interest Rate Parity

A theory explaining the relationship between interest rates and the exchange rate between two currencies.

Gilts

Government bonds issued by the United Kingdom, considered low-risk investments.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, treasury bills, and notes.