-Refer to the above market for money diagram.Given D_m and S_m,an interest rate of i₃ is not sustainable because: A) the supply of bonds in the bond market will decline and the interest rate will rise. B) the supply of bonds in the bond market will increase and the interest rate will decline. C) the demand for bonds in the bond market will decline and the interest rate will rise. D) the demand for bonds in the bond market will rise and the interest rate will fall.

Question

Quizplus · Accepted Answer

At an interest rate of i3, the demand for money exceeds the supply, leading to a shortage. This causes people to sell bonds to obtain money, decreasing bond prices and increasing interest rates.

-Refer to the Above Market for Money Diagram