Assume the Money Market Is Initially in Equilibrium

Multiple Choice

Assume the money market is initially in equilibrium. If the price level decreases, according to liquidity-preference theory, what is in excess and for how long?

A) The supply of money is in excess until the interest rate increases.
B) The supply of money is in excess until the interest rate decreases.
C) The demand for money is in excess until the interest rate increases.
D) The demand for money is in excess until the interest rate decreases.