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
A
You might also like to view...
What is search activity and how does it influence consumer surplus when a rent ceiling creates a housing shortage?
What will be an ideal response?
Carl is considering attending a concert with a ticket price of $35 . He estimates that the cost of driving to the concert and parking there will total an additional $20 . In order to attend the concert, Carl will have to take time off from his part-time job or forgo studying for an exam scheduled for the next morning. He estimates that he will lose 5 hours at work, at a wage of $6 per hour, or 5
hours of study time. If Carl considers studying the best alternative use of his time, his opportunity cost of attending the concert equals a. $55 b. $55 plus the value of the higher exam grade he could earn by studying for 5 hours c. $85 plus the value of the higher exam grade he could earn by studying for 5 hours d. $85 minus the value of the higher exam grade he could earn by studying for 5 hours e. $55 minus the value of the higher exam grade he could earn by studying for 5 hours