Question

In the moeny market, an excess supply of money is equivelant to an excess of bonds

Answer 1

Answer:

If there is an excess of money supply in the market, there will be an excess of demand for bonds.

This is because a higher money supply means lower interest rates, which make investment cheaper, although less rewarding (the yields are lower).

Answer 2

Answer:

The statement is: False.

Explanation:

When there is excess in the supply of money, people's buying power increases. Thus, they will have more money to buy assets such as bonds implying there will be more demand for bonds but less supply as people start purchasing them. As there is less supply of bonds their price is likely to rise which is interpreted in lower interest rates.