Rate (%) 10% 8% 6% MD 100 200 Money (S million) 25. Refer to Figure 3. If the money supply increases from MSa to MS1: a) money demand must decrease for the money market to return to equilibrium. b) the interest rate will decrease to 6%. 10%

Rate (%) 10% 8% 6% MD 100 200 Money (S million) 25. Refer to Figure 3. If the money supply increases from MSa to MS1: a) money demand must decrease for the money market to return to equilibrium. b) the interest rate will decrease to 6%. 10%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Figure 3:
MSo MS1
Interest
Rate (%) 10%
8%
6%
MD
100
200
Money ($ million)
25. Refer to Figure 3. If the money supply increases from MSa to MS1:
a) money demand must decrease for the money market to return to equilibrium.
b) the interest rate will decrease to 6%.
c) the interest rate will increase to 10%.
d) the money market will return to equilibrium only if the money supply is reduced to
its original level.

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