Figure 16-2

question 18

Multiple Choice

Figure 16-2. 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.

-Refer to Figure 16-2. As we move from one point to another along the money-demand curve MD₁,

• A) the price level is held fixed at P₁.
• B) the interest rate is held fixed at r₁.
• C) the money supply is changing so as to keep the money market in equilibrium.
• D) the expected inflation rate is changing so as to keep the real interest rate constant.

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