When the interest rate earned on government bonds is high, most people will try to hold:
A) more bonds and less cash.
B) less bonds and more cash.
C) more bonds and more cash.
D) less bonds and less cash.

Question

Quizplus · Accepted Answer

When the interest rate earned on government bonds is high, it becomes more attractive to hold bonds than cash. This is because the return on investment is higher with bonds than with cash. Therefore, most people will try to hold more bonds and less cash.

When the Interest Rate Earned on Government Bonds Is High