Use the table below to answer the following questions.
Table 24.5.1

-Refer to Table 24.5.1. The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two different levels of real GDP: Y₀ is $10 billion and Y₁ is $20 billion.
The quantity of money is $3 billion. Real GDP is $20 billion.
If the interest rate is less than 4 percent a year,
A)people sell bonds, the price of a bond falls, and the interest rate rises.
B)people buy bonds, the price of a bond rises, and the interest rate rises.
C)people sell bonds, the price of a bond falls, and the interest rate falls.
D)people buy bonds, the price of a bond rises, and the interest rate falls.
E)the demand for money increases.

Question

Use the table below to answer the following questions.
Table 24.5.1
 
-Refer to Table 24.5.1. The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two different levels of real GDP: Y₀ is $10 billion and Y₁ is $20 billion.
The quantity of money is $3 billion. Real GDP is $20 billion.
If the interest rate is less than 4 percent a year,
A)people sell bonds, the price of a bond falls, and the interest rate rises. 
B)people buy bonds, the price of a bond rises, and the interest rate rises. 
C)people sell bonds, the price of a bond falls, and the interest rate falls. 
D)people buy bonds, the price of a bond rises, and the interest rate falls. 
E)the demand for money increases.

Quizplus · Accepted Answer

When the interest rate is less than 4 percent, people will sell bonds to hold more money, causing bond prices to fall and interest rates to rise.

Use the Table Below to Answer the Following Questions