Use the Following to Answer Questions

question 190

Multiple Choice

Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate
-(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS₁ and the central bank buys Treasury bills, then the resulting short-run shift in the supply of savings (loanable funds) may be represented by a shift of the:

• A) money supply curve to MS₂, which raises the interest rate.
• B) supply of loanable funds from S₁ to S₂, which lowers the interest rate.
• C) supply of loanable funds from S₂ to S₁, which raises the interest rate.
• D) interest rate from r₂ to r₁.

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Definitions:

Medical Insurance

Insurance that reimburses the costs associated with medical and surgical care received by the insured individual.

Withholding Allowance

A claim made by employees on the W-4 form to reduce the federal income tax withheld from their paycheck.

Taxable Income

The portion of an individual's or business's income that is subject to income tax, after exemptions and deductions.

Taxable Income

The amount of an individual's or entity's income used to determine how much tax is owed, calculated as gross income minus deductions and exemptions.