Figure 35-4

question 35

Multiple Choice

Figure 35-4.On the figure,MS represents money supply and MD represents money demand.
-Refer to Figure 35-4.Suppose the current equilibrium interest rate is r₁.Let Y₁ represent the corresponding quantity of goods and services demanded,and let P₁ represent the corresponding price level.Starting from this situation,if the Federal Reserve increases the money supply and if the price level remains at P₁,then

• A)there will be an increase in the equilibrium quantity of goods and services demanded.
• B)there will be a decrease in the equilibrium quantity of goods and services demanded.
• C)there will be an increase in the equilibrium interest rate.
• D)fewer firms will choose to borrow to build new factories and buy new equipment.

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