Suppose That the Equilibrium Interest Rate Is 8 Percent,but the Actual

question 6

Multiple Choice

Suppose that the equilibrium interest rate is 8 percent,but the actual interest rate is 5 percent.Very quickly,

• A) bond prices fall
• B) bond prices will rise
• C) the interest rate will begin to fluctuate until bondholders reduce their demand for money
• D) the primary bond market will start its adjustment process
• E) the supply and demand for money will both increase

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