Question

In the market for money, an interest rate below equilibrium results in an excess ________ money and the interest rate will

Answer 1

In the market for money, an interest rate below equilibrium results in an excess supply of money and the interest rate will fall. It is because when the holdings of cash will occur when the interest rate below equilibrium.

In economics factor, a real interest rate generally can be described as the observed market interest rate adjusted for the effects of inflation. Real interest rate also can be defined as a reflects of the interest paid on an loan or also investment in the purchasing power value. To represent the rate of time-preference of a lender and borrower, interest rate are used.

To  calculate interest rate in economics we can use formula 1+i= (1+r)(1+$\pi$), where r represent real interest rate, i represent nominal interest rate and also $\pi$ represent expected inflation rate.

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