If the Quantity of Money Demanded Exceeds the Quantity Supplied

question 108

Multiple Choice

If the quantity of money demanded exceeds the quantity supplied,

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

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Definitions:

Interest Rate

The percentage of an amount of money charged for its use, indicating the cost of borrowing money or the return on invested savings.

Savings Exceeds Investment

A situation in which the amount saved by households or organisations is greater than the amount being invested within the economy.

Recession

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in GDP, real income, employment, industrial production, and wholesale-retail sales.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, over a specific period.