In the Money Market, If the Interest Rate Exceeds the Equilibrium

question 458

Multiple Choice

In the money market, if the interest rate exceeds the equilibrium interest, there is a surplus of money. How is the surplus eliminated?

• A) Banks will lend out the surplus, lowering interest rates.
• B) The high interest rate increases the demand for money, eliminating the surplus.
• C) People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down.
• D) The Federal Reserve will destroy currency, reducing the quantity of money.

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Definitions:

Avoidance

A behavior or strategy aimed at keeping away from certain situations or stimuli that are perceived as harmful or unpleasant.

Therapeutic Alliance

The collaborative bond and trust between a therapist and client, considered to be a crucial factor in the effectiveness of therapy.

Counseling

A professional process that involves assisting individuals, couples, or groups in solving personal or psychological problems through various therapeutic techniques.

Advice-Giving

The act of offering recommendations or guidance to someone, often within a professional or therapeutic context.