Multiple Choice
Suppose the money market has an equilibrium interest rate of 10 percent. If the actual interest is 8 percent, the quantity of money demanded is greater than the quantity of money supplied. Which of the following occurs to bring the money market back to equilibrium?
A) People buy bonds, the price of bonds falls and the interest rate rises.
B) People buy bonds, the price of bonds rises and the interest rate rises.
C) People sell bonds, the price of bonds falls and the interest rate rises.
D) People sell bonds, the price of bonds rises and the interest rate rises.
Correct Answer:
Verified
Correct Answer:
Verified
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