If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers.
A) must offer higher
B) can offer lower
C) can offer 2%
D) Sales of financial assets do not depend on the rate offered.

Question

Quizplus · Accepted Answer

If the equilibrium interest rate is 5%, and the sellers offer an interest rate of 2%, buyers will not be willing to purchase the assets because the opportunity cost of holding money is lower than the interest rate offered on the financial asset. Therefore, sellers must offer a higher interest rate to incentivize buyers to purchase the assets.

If the Equilibrium Interest Rate in the Money Market Is