As bonds become a riskier asset,the demand for money ________ and,all else constant,the equilibrium interest rate ________.
A)rises;rises
B)rises;falls
C)falls;rises
D)falls;falls

Question

Quizplus · Accepted Answer

When bonds become riskier, people prefer holding money as it is considered safer, thus the demand for money rises. As the demand for money increases, the supply of money being constant, the equilibrium interest rate also rises due to the increased competition for available funds.

As Bonds Become a Riskier Asset,the Demand for Money ________