-The table above shows information on the quantity of money and the money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that
A) the money market is in equilibrium.
B) people buy bonds and the interest rate falls.
C) people sell bonds and the interest rate falls.
D) bond prices fall and so the interest rate falls.

Question

-The table above shows information on the quantity of money and the money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that
A) the money market is in equilibrium. 
B) people buy bonds and the interest rate falls. 
C) people sell bonds and the interest rate falls. 
D) bond prices fall and so the interest rate falls.

Quizplus · Accepted Answer

When the interest rate is higher than the equilibrium rate, people prefer to hold less money and buy bonds, which increases bond prices and decreases the interest rate.

-The Table Above Shows Information on the Quantity of Money