answer the following image Refer to the figure above, when the money supply curve shifts from $MS_1$ to $MS_2$,Select one:- a. the demand for goods and services decreases.- b. the economy's ability to produce goods and services increases.- c. None of the above is correct.- d. the equilibrium price level decreases.**Diagram Explanation:**The diagram is a graph with the "Value of Money" on the vertical axis and the "Quantity of Money" on the horizontal axis. It shows two vertical money supply curves, $MS_1$ and $MS_2$, with $MS_2$ to the right of $MS_1$, indicating an increase in the money supply. A downward-sloping "Money Demand" curve intersects the $MS_1$ curve at point A and the $MS_2$ curve at point B. Horizontal lines from these points extend to the value levels on the vertical axis.

In an economy, an a vertical MS curve explain the inelastic money supply in the short-run at different interest rate.If MS curve shifts to the right, it implies that there is an increase in money supply in the market, which further lead to increase demand, increase the ability of the firms to produce more with more capital, and increases equilibrium price level due to higher demand. Hence, the correct option is: b.

Business

Economics

Value of Money MS1 MS2 A B Money Demand Quantity of Money Refer to figure above, when the money supply curve shifts from MS1 to MS2, Select one: a. the demand for goods and services decreases. the economy's ability to produce goods and services increases. Ос. None of the above is correct. d. the equilibrium price level decreases. 1.

Value of Money MS1 MS2 A B Money Demand Quantity of Money Refer to figure above, when the money supply curve shifts from MS1 to MS2, Select one: a. the demand for goods and services decreases. the economy's ability to produce goods and services increases. Ос. None of the above is correct. d. the equilibrium price level decreases. 1.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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