When the interest rate on a bond is ________ the equilibrium interest rate,there is excess ________ in the bond market and the interest rate will ________.
A) above; demand; fall
B) above; demand; rise
C) below; supply; fall
D) above; supply; rise

Question

Quizplus · Accepted Answer

When the interest rate on a bond is above the equilibrium interest rate, there is excess demand in the bond market because the higher returns attract more buyers. As a result, the interest rate will fall to reach equilibrium.

When the Interest Rate on a Bond Is ________ the Equilibrium