Figure 14-4
-In Figure 14-4,let i3 represent any interest rate below the equilibrium interest rate of i2.Thus,when the economy is at i2,people will tend to

Question

Figure 14-4 
-In Figure 14-4,let i3 represent any interest rate below the equilibrium interest rate of i2.Thus,when the economy is at i2,people will tend to

Quizplus · Accepted Answer

When the interest rate is below the equilibrium interest rate, people will tend to sell bonds so as to convert them into cash. This is because they can get a higher return on their money by holding cash than by holding bonds.

Figure 14-4 -In Figure 14-4,let I3 Represent Any Interest Rate Below the Rate