In Keynes's view, an excess quantity of money demanded causes people to:
A) sell bonds and the interest rate rises.
B) buy bonds and the interest rate falls.
C) buy bonds and the interest rate rises.
D) increase speculative balances.

Question

Quizplus · Accepted Answer

In Keynes's view, an excess quantity of money demanded (or a liquidity preference) leads people to sell bonds, which increases the supply of bonds in the market, lowering their price and thus raising the interest rate.

In Keynes's View, an Excess Quantity of Money Demanded Causes