If the interest rate in the money market is above equilibrium,
A) people buy bonds in exchange for money.
B) a fall in the interest rate results in a shortage of money in equilibrium.
C) the quantity of money demanded exceeds the quantity of money supplied.
D) market forces raises the interest rate.

Question

Quizplus · Accepted Answer

When the interest rate is above equilibrium, people will buy bonds to take advantage of the higher interest rates, which increases the demand for bonds and decreases the demand for money, eventually leading the interest rate to fall back to equilibrium.

If the Interest Rate in the Money Market Is Above