If the quantity supplied of money is less than the quantity demanded of money, people will ________ bonds which will cause bond prices to ________ and the nominal interest rate to ________ until the quantity demanded and quantity supplied of money are equal.
A)sell; fall; rise
B)sell; fall; fall
C)sell; rise; fall
D)buy; fall; rise

Question

Quizplus · Accepted Answer

When the quantity supplied of money is less than the quantity demanded, people sell bonds to raise cash. This lowers bond prices and causes nominal interest rates to rise.

If the Quantity Supplied of Money Is Less Than the Quantity