Suppose That at a Given Interest Rate and Money Supply

question 64

Multiple Choice

Suppose that at a given interest rate and money supply, all firms and households simultaneously try to reduce their money balances. They do this by trying to , which causes an excess , which causes a(n) _ , and finally a(n) in the interest rate.

• A)buy bonds; supply of bonds; decrease in the price of bonds; increase
• B)sell bonds; demand for bonds; increase in the price of bonds; decrease
• C)sell bonds; supply of bonds; decrease in the price of bonds; increase
• D)buy bonds; demand for bonds; increase in the price of bonds; decrease
• E)sell bonds; supply of bonds; increase in the price of bonds; decrease

---

Definitions:

Negotiability

The quality of a financial instrument that allows it to be transferred or assigned from one party to another in exchange for value.

Sum Certain In Money

A specified, fixed, or exact amount of money that is owed or due to be paid under a contract or agreement.

Enforceable Contract

a valid agreement between parties that can be legally upheld and compelled in a court of law.

Payment

The transfer of money or goods from one party to another as a fulfillment of a transaction or obligation.