Suppose that an individual can hold her wealth in only two forms: money and bonds.A _______________ in the bond market would then imply that there is a ________________ in the money market.
A)
surplus; surplus
B)
shortage; shortage
C)
surplus; shortage
D)
shortage; surplus
E)
c and d

Question

Quizplus · Accepted Answer

If there is a shortage in the bond market, it means the demand for bonds is greater than the supply. As a result, individuals will need to hold onto more money to purchase these bonds, leading to a surplus in the money market. Therefore, a shortage in the bond market implies there is a surplus in the money market.

Suppose That an Individual Can Hold Her Wealth in Only