FIGURE 27-3
-Refer to Figure 27-3.Part (i)of the figure shows the money market and the effect of an increase in the supply of money.The corresponding sequence of events in the bond market is as follows: The ________ of money at leads firms and households to ________ bonds,which leads to a(n)________ in the price of bonds and a decrease in the interest rate.

Question

FIGURE 27-3
-Refer to Figure 27-3.Part (i)of the figure shows the money market and the effect of an increase in the supply of money.The corresponding sequence of events in the bond market is as follows: The ________ of money at  leads firms and households to ________ bonds,which leads to a(n)________ in the price of bonds and a decrease in the interest rate.

Quizplus · Accepted Answer

An excess supply of money leads to individuals and firms buying more bonds in the bond market. This increased demand for bonds leads to an increase in bond prices and a decrease in interest rates. Therefore, Choice E (excess supply, buy, increase) is the best choice.

FIGURE 27-3 -Refer to Figure 27-3.Part (I)of the Figure Shows the Money