Use the following to answer questions .
Exhibit: Money and Investment
-(Exhibit: Money and Investment) If the money supply is decreased in Panel (a) from MS₁ to MS₂, then in Panel (b) ,

Question

Use the following to answer questions . Exhibit: Money and Investment -(Exhibit: Money and Investment) If the money supply is decreased in Panel (a) from MS₁ to MS₂, then in Panel (b),

Quizplus · Accepted Answer

According to the exhibit, a decrease in the money supply in Panel (a) leads to an increase in the interest rate from i1 to i2. This increase in interest rate leads to a decrease in investment demand from C to D in Panel (b), resulting in a movement along the investment demand curve from C to D. Therefore, the correct answer is B.

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