Refer to the Graph Below, in Which D_t Is the Transactions

question 197

Multiple Choice

Refer to the graph below, in which D_t is the transactions demand for money, D_m is the total demand for money, and S_m is the supply of money.If the market for money is in equilibrium at a 6 percent rate of interest and the money supply increases, then S_m2 will shift to:

• A)S_m3 and the interest rate will be 4 percent.
• B)S_m3 and the interest rate will be 8 percent.
• C)S_m1 and the interest rate will be 8 percent.
• D)S_m1 and the interest rate will be 4 percent.

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