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Suppose That the Equilibrium Nominal Interest Rate Is 4 Percent

Question 28

Multiple Choice

Suppose that the equilibrium nominal interest rate is 4 percent and the equilibrium quantity of money is $1 trillion. At any interest rate above 4 percent,


A) more than $1 trillion will be supplied and the interest rate will rise.
B) less than $1 trillion will be demanded and bond prices will fall.
C) more than $1 trillion will be supplied and bond prices will fall.
D) there is a shortage of money and the interest rate will rise.
E) less than $1 trillion will be demanded and bond prices will increase.

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