Use the data in Problem 7 to work this problem. The interest rate is 4 percent a year. Suppose that real GDP decreases from $20 billion to $10 billion and the quantity of money remains unchanged. Do...

Use the data in Problem 7 to work this problem.

The interest rate is 4 percent a year. Suppose

that real GDP decreases from $20 billion to

$10 billion and the quantity of money remains

unchanged. Do people buy bonds or sell bonds?

Explain how the interest rate changes.

The Quantity Theory of Money