CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Given a constant money supply, people may be expected to purchase more bonds if the money interest rate ______ the equilibrium rate in the money balances market.
A. has no relationship to
B. is lower than
C. is higher than
Explanation: When actual interest rate is higher than the equilibrium rate, there is an excess of money supply. People are expected to reduce their holdings of money balances and purchase some bonds to take advantage of high rates. The process will move the market for money balances toward equilibrium.

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