Suppose that at a given interest rate and money supply, all firms and households simultaneously try to add to their money balances. They do this by trying to , which causes an excess , which causes a(n)_ , and finally a(n) in the interest rate.

Question

Quizplus · Accepted Answer

When firms and households try to add to their money balances, they sell bonds, increasing the supply of bonds, which decreases the price of bonds and causes an increase in the interest rate.

Suppose That at a Given Interest Rate and Money Supply