When the Quantity of Money Demanded Is Greater Than the Quantity

question 509

Multiple Choice

When the quantity of money demanded is greater than the quantity of money supplied, people ________ bonds and the interest rate ________.

• A) sell; rises
• B) sell; falls
• C) buy; rises
• D) buy; falls

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Definitions:

Interest Expense

The finance charges that accrue to an entity from borrowing money over a period.

Note Agreement

A legal document outlining the terms and conditions of a loan between a borrower and a lender.

Compounded Annually

Describes interest on an investment or loan calculated once a year on both the initial principal and the accumulated interest from previous periods.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, reflecting the time value of money.