In the figure below, the loanable funds market is in equilibrium at A with the interest rate IR ₁ . In conducting monetary policy, the Federal Reserve engages in the buying of US Treasury securities on the open market, which causes

Question

In the figure below, the loanable funds market is in equilibrium at A with the interest rate IR <sub>1</sub> . In conducting monetary policy, the Federal Reserve engages in the buying of US Treasury securities on the open market, which causes A) no change in the loanable funds market, so the equilibrium interest rate remains at IR<sub>1</sub>. B) the demand for loanable funds to increase to D', causing the equilibrium interest rate to increase to IR<sub>2</sub>. C) both the demand for loanable funds and the supply of loanable funds to increase to D' and S' respectively, keeping the equilibrium interest rate at IR<sub>1</sub>. D) the supply of loanable funds to increase to S', causing the equilibrium interest rate to fall to IR<sub>3</sub>.

Quizplus · Accepted Answer

The Answer of In the figure below, the loanable funds market is in equilibrium at A with the interest rate IR ₁ . In conducting monetary policy, the Federal Reserve engages in the buying of US Treasury securities on the open market, which causes

In the Figure Below, the Loanable Funds Market Is in Equilibrium