In Keynes's view, an excess quantity of money supplied causes people to:
A) sell bonds and the interest rate rises.
B) buy bonds and the interest rate falls.
C) buy bonds and the interest rate rises.
D) increase speculative balances.

Question

Quizplus · Accepted Answer

Keynes believed that an excess supply of money would lead people to buy bonds, which increases their price and, as a result, lowers the interest rate. This is because the interest rate and the price of bonds move inversely to each other.

In Keynes's View, an Excess Quantity of Money Supplied Causes