In the money market, if the interest rate exceeds the equilibrium interest, there is a surplus of money. How is the surplus eliminated?
A) The Reserve Bank will destroy currency, reducing the quantity of money.
B) People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down.
C) The high interest rate increases the demand for money, eliminating the surplus.
D) Banks will lend out the surplus, lowering interest rates.
Correct Answer:
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