When the interest rate is above the equilibrium interest rate there is an
A) excess quantity of money and people will sell bonds.
B) excess demand for money and people will sell bonds.
C) excess quantity of money and people will buy bonds.
D) excess demand for money and people will buy bonds.

Question

Quizplus · Accepted Answer

When the interest rate is above the equilibrium rate, there is an excess supply of money, leading people to buy bonds to earn higher interest, thus driving the interest rate down towards equilibrium.

When the Interest Rate Is Above the Equilibrium Interest Rate