Which of the following statements is true if interest rates were zero?
A) The demand for bonds increases because bonds will be a more attractive alternative to money.
B) People will hold their wealth in the form of money rather than in bonds.
C) Bonds and money will become perfect substitutes since both are non-interest earning assets.
D) The supply of bonds will increase.
Ans: B) People will hold their wealth in the form of money rather than in bonds.
You might also like to view...
Which of the following statements is true?
A) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale. B) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited. C) Every individual, no matter how rich or poor, is faced with situations that require trade-offs. D) Any time you have to decide which action to take you are experiencing economic equity.
Businesses will want to borrow more funds as the real rate of interest decreases
a. True b. False Indicate whether the statement is true or false