In Keynes' view, an excess quantity of money demanded causes people to:
A) sell bonds pushing the interest rate up.
B) buy bonds pushing the interest rate down.
C) buy bonds pushing the interest rate up.
D) increase speculative balances.

Question

Quizplus · Accepted Answer

In Keynes' view, an excess quantity of money demanded (or a shortage of money supply) leads people to sell bonds to obtain the needed liquidity. This selling pressure on bonds causes bond prices to fall and, inversely, causes interest rates to rise, as bond prices and interest rates move in opposite directions.

In Keynes' View, an Excess Quantity of Money Demanded Causes