Starting from equilibrium in the money market, suppose the money supply increases. Other things being equal, this will cause an excess demand for money, leading people to sell bonds.

Question

Quizplus · Accepted Answer

An increase in the money supply would lead to a decrease in the interest rate, which would cause an increase in the demand for bonds. Therefore, people would not sell bonds in response to the increase in the money supply.

Starting from Equilibrium in the Money Market, Suppose the Money