Figure 10-3
-Refer to Figure 10-3. In equilibrium the interest rate is

Question

Figure 10-3 
-Refer to Figure 10-3. In equilibrium the interest rate is

Quizplus · Accepted Answer

In equilibrium, the interest rate is at the intersection of the money demand curve (MD) and the money supply curve (MS). This occurs at point U1 where MD and MS intersect. At this point, the interest rate is r₁ and the quantity of money is Q₁. Option A is incorrect because the interest rate is not equal to r₂, and option B is incorrect because the quantity of money is not equal to Q₂. Option D is too vague, as r and Q₂ do not specify the exact equilibrium values.

Figure 10-3 -Refer to Figure 10-3. in Equilibrium the Interest Rate Is