4. Consider a money market in which there is an excess supply of money at the current interest rate. Then what likely to happen is the money supply curve will shift to the right until the demand for money equals the supply. the money demand curve will shift to the right, causing the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply. the corresponding excess supply for bonds will cause the price of bonds to increase, and the interest rate to fall, until the quantity demanded of money equals the quantity supplied of money. the corresponding excess demand for bonds will cause the price of bonds to increase, and the interest rate to fall, until the quantity demanded of money equals the quantity supplied of money. the money supply curve will shift to the left until the demand for money equals the supply.

A market where the companies issue the highly liquid or short term securities is refers to money…

Answered: Consider a money market in which there…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Consider a money market in which there is an excess supply of money at the current interest rate. Then what likely to happen is

		the money supply curve will shift to the right until the demand for money equals the supply.
		the money demand curve will shift to the right, causing the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply.
		the corresponding excess supply for bonds will cause the price of bonds to increase, and the interest rate to fall, until the quantity demanded of money equals the quantity supplied of money.
		the corresponding excess demand for bonds will cause the price of bonds to increase, and the interest rate to fall, until the quantity demanded of money equals the quantity supplied of money.
		the money supply curve will shift to the left until the demand for money equals the supply.

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