$\begin{array}{|c|l|l|}
\hline \begin{array}{c}
\text { Interest rate } \
\text { (percent) }
\end{array} & \begin{array}{l}
\text { lantity of money } \
\text { lllions ofdollars) }
\end{array} & \begin{array}{l}
\text { Money demand } \
\text { billions of dollars) }
\end{array} \\hline 2 & 500 & 575 \
\hline 3 & 500 & 550 \
\hline 4 & 500 & 525 \
\hline 5 & 500 & 500 \
\hline 6 & 500 & 475 \
\hline 7 & 500 & 450 \
\hline
\end{array}$
-The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that
A) the money market is in equilibrium.
B) bond prices rise so that the interest rate rises.
C) people buy bonds and the interest rate falls.
D) people sell bonds and the interest rate rises.

Question

Quizplus · Accepted Answer

When the interest rate is 3 percent, the quantity of money supplied (500 billion dollars) is less than the money demanded (550 billion dollars), leading people to sell bonds to obtain more money, which causes the interest rate to rise.

-The Table Above Gives the Quantity of Money and Money