Refer to the Four Graphs Above

question 203

Multiple Choice

Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: the market for music CDs sold in stores, if
More consumers switch to music-downloads from the Internet and the cost of making music CDs
Decreases because of technological improvement in production.

• A) Graph A
• B) Graph B
• C) Graph C
• D) Graph D

---

Definitions:

Lender of Last Resort

A function usually performed by a central bank to provide funds to financial institutions facing liquidity problems to prevent their failure and systemic risks to the economy.

Excess Reserves

The amount of reserves held by banks over and above the legally mandated requirement.

Destroyed Money

Money that has been taken out of circulation, either physically by damage or dematerialization, or digitally by central authorities to control the money supply.

Liquidity Trap

A scenario where low interest rates and high savings rates make it difficult for monetary policy to boost economic growth.