Use the Following to Answer Questions

question 2

Multiple Choice

Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate
-(Figure: Short-Run Determination of the Interest Rate) Look at the figure Short-Run Determination of the Interest Rate. If the money supply is at MS₂ and the central bank sells Treasury bills, then in the short run the interest rate will:

• A)decrease below r₂.
• B)remain at r₂.
• C)increase to r₁.
• D)fluctuate randomly.