Multiple Choice
Assume that the desired reserve ratio is 10 percent and there are no excess reserves in the banking system.Also, suppose that the full-employment, non-inflationary level of GDP in this closed, private economy is $1,200. 
Refer to the above information.An interest rate of 2 percent is not sustainable because:
A) the demand for bonds in the bond market will fall and the interest rate will fall.
B) the demand for bonds in the bond market will rise and the interest rate will fall.
C) the supply of bonds in the bond market will decline and the interest rate will rise.
D) the supply of bonds in the bond market will rise and the interest rate will rise.
Correct Answer:
Verified
Correct Answer:
Verified
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