An increase in the demand for Treasury bills will
A)decrease the price of Treasury bills.
B)decrease the interest rate on Treasury bills.
C)increase the opportunity cost of holding money.
D)eventually cause households to hold less money.

Question

Quizplus · Accepted Answer

An increase in the demand for Treasury bills means that buyers are willing to pay more for them, which results in a decrease in the interest rate on Treasury bills. This is because the return on investment is inversely related to the price. Hence, choice B is the correct answer. Option A is incorrect because an increase in demand will lead to an increase in price, not a decrease. Option C is not directly associated with this scenario, and option D is not relevant.

An Increase in the Demand for Treasury Bills Will