Suppose That the Equilibrium Nominal Interest Rate Is 5 Percent

question 237

Multiple Choice

Suppose that the equilibrium nominal interest rate is 5 percent and the equilibrium quantity of money is $1 trillion. At any interest rate below 5 percent,

• A) the interest rate will rise and bond prices will fall.
• B) the interest rate will fall and bond prices will fall.
• C) there will be a surplus of money and bond prices will fall.
• D) there will be a surplus of money and bond prices will increase.
• E) the supply of money will decrease.

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