Use the Following to Answer Questions

question 84

Multiple Choice

Use the following to answer questions:
-(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 i₂ to i₁.

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Definitions:

Rational Choice Theory

Rational choice theory focuses on the way interacting people weigh the benefits and costs of interaction. According to rational choice theory, interacting people always try to maximize benefits and minimize costs.

Rational Choice Theory

A theoretical framework that suggests individuals make decisions based on the anticipated costs and benefits, aiming to maximize their advantage.

Social Interaction

The process by which individuals act and react in relation to others, forming the basis of social relationships.