Homework Answers
a.
Explanation: Excess money in hands causes increased demand for bonds which creates downward pressure on interest rates.
b.
Explanation: With less interest rate (return on bonds), people hold more money. Rise in national income implies people will need more money for transactional purposes.
c.
Explanation: Since interest rate(return) is low, people will sell bonds. This will bring interest rate (return) up due to increased supply and less demand for bonds.
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