-Refer to the above market for money diagram.If the interest rate was at 3 percent,people would:
A) sell bonds,which would cause bond prices to fall and the interest rate to rise.
B) buy bonds,which would cause bond prices to fall and the interest rate to rise.
C) sell bonds,which would cause bond prices to rise and the interest rate to rise.
D) buy bonds,which would cause bond prices to rise but have an uncertain effect upon the interest rate.

Question

-Refer to the above market for money diagram.If the interest rate was at 3 percent,people would:
A) sell bonds,which would cause bond prices to fall and the interest rate to rise. 
B) buy bonds,which would cause bond prices to fall and the interest rate to rise. 
C) sell bonds,which would cause bond prices to rise and the interest rate to rise. 
D) buy bonds,which would cause bond prices to rise but have an uncertain effect upon the interest rate.

Quizplus · Accepted Answer

If the interest rate is at 3 percent and is below the equilibrium rate, people would sell bonds to hold more money, causing bond prices to fall and the interest rate to rise.

-Refer to the Above Market for Money Diagram