The money market equilibrium is defined as_________
-
when the demand and supply of money are equal
- when demand is greater than supply of money
- when demand is less than supply of money
- when supply is greater than demand for money
The correct answer is: A
Explanation
The money market is in equilibrium when the demand & supply of money are equal i.e L = ฮผ
where L = money demand, ฮผ = money supply
Thus ฮผ = LT(ฮณ) + Ls(r)