Whenever There Is Excess Demand for Real Balances, Short-Run Adjustment

Multiple Choice

Whenever there is excess demand for real balances, short-run adjustment occurs because:

A) savers and investors buy bonds and drive up their prices (drive down nominal rates of interest) .
B) investors and borrowers sell bonds (convert to cash) and drive down their prices (drive up nominal rates of interest) .
C) the price level falls to restore real balances.
D) aggregate demand is decreased to restore equilibrium.