Use the table below to answer the following questions.

Table 8.5.1

A

B

C

1

r

Y0

Y1

2

7

1.0

1.5

3

6

1.5

2.0

4

5

2.0

2.5

5

4

2.5

3.0

6

3

3.0

3.5

7

2

3.5

4.0

8

1

4.0

4.5

Refer to Table 8.5.1. The spreadsheet provides information about the demand for money in Minland.

Column A is the nominal interest rate,r. Columns B and C show the quantity of money demanded at two different levels of real GDP:Y0is $10 billion andY1is $20 billion.

The quantity of money is $3 billion. Real GDP is $20 billion.

If the interest rate is less than 4 percent a year,

Question 22 options:

a)

people buy bonds, the price of a bond rises, and the interest rate falls.

b)

people sell bonds, the price of a bond falls, and the interest rate falls.

c)

the demand for money increases.

d)

people buy bonds, the price of a bond rises, and the interest rate rises.

e)

people sell bonds, the price of a bond falls, and the interest rate rises.