Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent. As a result,
A) real GDP increases.
B) people buy bonds and the interest rate falls.
C) the interest rate rises.
D) the demand for money curve shifts rightward.

Question

Quizplus · Accepted Answer

When the current interest rate is above the equilibrium interest rate, people will sell bonds and buy money, causing the demand for money curve to shift rightward, which will decrease the interest rate until it reaches the equilibrium level.

Suppose the Equilibrium Interest Rate in the Money Market Is