True or False?
The statement is basically true. Asset equilibrium is stock equilibrium while goods market equilibrium is flow equilibrium. Essentially, the public can hold assets in three forms---as human capital, as physical capital and as real money holdings. Physical capital can be held both directly (as titles to trucks, houses, etc.) and indirectly in the form of stocks or bonds that signify claims on a portion of the physical capital held by the individuals or institutions issuing them. Since human capital cannot be bought and sold, any attempt to acquire more money holdings must involve a sale of tradable non-monetary (direct and indirect physical capital) assets. So when the public holds its desired money stock it also holds its desired stock of non-monetary assets, and full stock equilibrium must therefore hold provided, of course, that the mix of the various non-human non-monetary assets in private portfolios is the desired one. Asset holders will automatically adjust their relative holdings of these assets to maintain the desired mix by purchases and sales in international and domestic asset markets with the equilbrium prices of these assets being determined essentially in the international market. Had you answered false on the grounds that domestic residents must also be holding their desired mix of non-monetary assets, give yourself a perfect score although, when we think of tradeable non-monetary assets as a single aggregate yielding single nominal and real interest rates, it is clearly the case that a sufficient condition for asset equilibrium to hold is that the public be holding its desired stock of money.