Figure 34-2

question 111

Multiple Choice

Figure 34-2.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
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-Refer to Figure 34-2.If the money-supply curve MS on the left-hand graph were to shift to the left,this would

• A)represent an action taken by the Federal Reserve.
• B)shift the AD curve to the left.
• C)create,until the interest rate adjusted,an excess demand for money at the interest rate that equilibrated the money market before the shift.
• D)All of the above are correct.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of demand to price changes.

Linear

Pertaining to a relationship or an equation that can be represented by a straight line in a graphical representation, illustrating a constant rate of change.

Downward-Sloping

A characteristic of a graph or curve that shows a decrease in one variable in response to an increase in another, commonly seen in demand curves.

Constant Elasticity

A condition in economics where the elasticity of one variable with respect to another is consistent across different levels of those variables.