Suppose That the Equilibrium Nominal Interest Rate Is 4 Percent

question 7

Multiple Choice

Suppose that the equilibrium nominal interest rate is 4 percent and the equilibrium quantity of money is $1 trillion. At any interest rate above 4 percent,

• A) less than $1 trillion will be demanded and bond prices will increase.
• B) less than $1 trillion will be demanded and bond prices will fall.
• C) more than $1 trillion will be supplied and bond prices will fall.
• D) more than $1 trillion will be supplied and the interest rate will rise.
• E) there is a shortage of money and the interest rate will rise.

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Definitions:

Ratio Analysis

A quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by comparing line items on financial statements.