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Which of the following is true about the asset market equilibrium? A) The asset market is...

Which of the following is true about the asset market equilibrium? A) The asset market is in equilibrium only if the labour market is in equilibrium. B) The asset market is in equilibrium when the money market is in equilibrium. C) The money market is in equilibrium only if the non-monetary asset market is in equilibrium. D) The asset market is in equilibrium, even if the money market is not.

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Answer #1

Option B.

  • An asset market equilibrium is said to occur when the demand for any assets equals the supply of those assets.
  • This equilibrium is usually related to the money market equilibrium which states the demand for money equals the supply of money.
  • Hence the asset market is in equilibrium when the money market is in equilibrium as this equilibrium level is reached when the quantity of money demanded equals the quantity of Money supplied.
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