Use the Following to Answer Questions

question 5

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 MS₂ and the central bank sells 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 MS₁, which lowers 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 r₁ to r₂.

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