FIGURE 27-2 -Refer to Figure 27-2. If the Interest Rate Is I1

FIGURE 27-2
-Refer to Figure 27-2. If the interest rate is i1, the subsequent adjustment in the money market is as follows:

A) excess demand for money leads to a sale of bonds, which in turn causes the interest rate to rise.
B) the MS curve will shift to the left so as to maintain the interest rate at i2.
C) the interest rate will remain at i1 because the money market is in equilibrium at this interest rate.
D) excess supply of money leads to the purchase of bonds, which in turn causes the interest rate to fall.
E) excess demand for money leads to a purchase of bonds, which in turn causes the interest rate to rise.