When the interest rate on a bond is above the equilibrium interest rate,in the bond market there is excess ________ and the interest rate will ________.
A)demand;rise
B)demand;fall
C)supply;fall
D)supply;rise

Question

Quizplus · Accepted Answer

When the interest rate on a bond is above the equilibrium interest rate, there is excess demand for bonds because the higher interest makes them more attractive to investors. As a result, the price of bonds increases, which in turn causes the interest rate to fall towards the equilibrium level.

When the Interest Rate on a Bond Is Above the Equilibrium