Table 24.5.1

-Refer to Table 24.5.1. The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two different levels of real GDP: Y0 is $10 billion and Y1 is $20 billion.
The quantity of money is $3 billion. Real GDP is $20 billion.
If the interest rate is less than 4 percent a year,
A)people sell bonds, the price of a bond falls, and the interest rate rises.
B)people buy bonds, the price of a bond rises, and the interest rate rises.
C)people sell bonds, the price of a bond falls, and the interest rate falls.
D)people buy bonds, the price of a bond rises, and the interest rate falls.
E)the demand for money increases.

Question

Table 24.5.1
 
-Refer to Table 24.5.1. The spreadsheet provides information about the demand for money in Minland. Column A is the nominal interest rate, r. Columns B and C show the quantity of money demanded at two different levels of real GDP: Y0 is $10 billion and Y1 is $20 billion.
The quantity of money is $3 billion. Real GDP is $20 billion.
If the interest rate is less than 4 percent a year,
A)people sell bonds, the price of a bond falls, and the interest rate rises. 
B)people buy bonds, the price of a bond rises, and the interest rate rises. 
C)people sell bonds, the price of a bond falls, and the interest rate falls. 
D)people buy bonds, the price of a bond rises, and the interest rate falls. 
E)the demand for money increases.

Quizplus · Accepted Answer

When the interest rate is less than 4 percent, people will sell bonds because they prefer to hold money, leading to a decrease in bond prices and an increase in interest rates.

Table 24.5.1 -Refer to Table 24.5.1. the Spreadsheet Provides Information About the Provides