Asked by Nicholas Fusiara on Mar 10, 2024
Verified
When there is an excess supply of money,
A) people will try to get rid of money causing interest rates to rise.Investment increases.
B) people will try to get rid of money causing interest rates to fall.Investment decreases.
C) people will try to get rid of money causing interest rates to fall.Investment increases.
D) people will try to get rid of money causing interest rates to rise.Investment decreases.
Excess Supply of Money
A situation where the quantity of money available in the economy surpasses the demand for it, potentially leading to inflation.
Interest Rates
The cost of borrowing money, expressed as a percentage of the total amount of the loan, usually on an annual basis.
Investment
The allocation of resources, typically money, in order to gain profitable returns, as interest, income, or appreciation in value.
- Explain how variations in the money supply influence the balance within the money market.
- Examine the consequences of monetary policy choices on investment levels, real GDP, and stock market performance.
Verified Answer
GM
Gabriel Mena-MoralesMar 10, 2024
Final Answer :
C
Explanation :
When there is an excess supply of money, people will try to get rid of their excess money by investing or lending it, which increases the supply of loanable funds. This increased supply leads to lower interest rates, making borrowing cheaper and encouraging more investment.
Learning Objectives
- Explain how variations in the money supply influence the balance within the money market.
- Examine the consequences of monetary policy choices on investment levels, real GDP, and stock market performance.