When the Interest Rate Is Above the Equilibrium Level

question 5

Multiple Choice

When the interest rate is above the equilibrium level,

• A)the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied.
• B)people respond by buying interest-bearing bonds or by depositing money in interest-bearing bank accounts.
• C)bond issuers and banks respond by lowering the interest rates they offer.
• D)All of the above are correct.

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Definitions:

Critical Thinking

The objective analysis and evaluation of an issue in order to form a judgment.

Planning

The process of deciding in detail how to do something before actually starting to do it, including setting goals and determining actions.

Directing

Motivating and leading employees to achieve organizational objectives.