If the Equilibrium Interest Rate in the Money Market Is

question 72

Multiple Choice

If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers.

• A) must offer higher
• B) can offer lower
• C) can offer 2%
• D) Sales of financial assets do not depend on the rate offered.

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Definitions:

Fixed Prices

Prices that do not change in response to market fluctuations, often set by government regulation or by agreement between parties.

Total Spending

The aggregate amount of expenditure by all sectors of the economy, including households, businesses, government, and foreign buyers.

Larger Output

Production at a higher volume, often pursued to achieve economies of scale and reduce the average cost per unit.

Government Purchases

Expenditures by the government sector for goods and services that government consumes in providing public services and for public capital that has long-term usage.