When the quantity of money demanded is greater than the quantity of money supplied, people ________ bonds and the interest rate ________.
A) sell; rises
B) sell; falls
C) buy; rises
D) buy; falls

Question

Quizplus · Accepted Answer

When the quantity of money demanded exceeds the quantity of money supplied, people sell bonds to obtain more money, which increases the supply of bonds in the market, leading to a decrease in bond prices and an increase in interest rates.

When the Quantity of Money Demanded Is Greater Than the Quantity