The​ ________ of money at i0 leads firms and households to​ ________ bonds, which leads to​ a(n) ________ in the price of bonds and an increase in the interest rate. A. excess​ supply; buy; decrease B. excess demand​;sell​;decrease C. excess supply​;buy​;increase D. excess​ demand; sell; increase

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Part​ (i) of the figure shows the money market and the effect of a decrease in the supply of money. The corresponding sequence of events in the bond market is as​ follows: The​ ________ of money at i0 leads firms and households to​ ________ bonds, which leads to​ a(n) ________ in the price of bonds and an increase in the interest rate. A. excess​ supply; buy; decrease B. excess demand​;sell​;decrease C. excess supply​;buy​;increase D. excess​ demand; sell; increase
Interest Rate
MD MS1
lio
E₁
Mso
Eo
M₁
Quantity of Money
(i) Money demand and supply
Mo
O
Interest Rate
1₁
io
B
Investment Expenditure
(ii) Investment demand
Transcribed Image Text:Interest Rate MD MS1 lio E₁ Mso Eo M₁ Quantity of Money (i) Money demand and supply Mo O Interest Rate 1₁ io B Investment Expenditure (ii) Investment demand
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