Explain How People Will Switch Between Bonds and Money If

question 32

Essay

Explain how people will switch between bonds and money if the interest rate is initially below the market-clearing level. Explain your answer in terms of opportunity costs.

---

Definitions:

Profit-generating Product

A product that significantly contributes to a company's revenues exceeding its costs, thereby creating a profit.

Ethically

Pertaining to or dealing with morals or the principles of morality; relating to right and wrong in conduct.

Judicial Review

The process by which courts decide on the constitutionality of legislative enactments and actions of the executive branch.

Congressional Approval

The act of obtaining official permission or endorsement from the United States Congress for certain actions, laws, or regulations.