Figure 34-6 -Refer to Figure 34-6. A shift of the money-demand curve from MD₂ to MD₁ is consistent with which of the following sets of events? A)The government cuts taxes, resulting in an increase in people's incomes. B)The government reduces government spending, resulting in a decrease in people's incomes. C)The Federal Reserve increases the supply of money, which decreases the interest rate. D)The Federal Reserve decreases the supply of money, which increases the interest rate.

Question

Quizplus · Accepted Answer

A decrease in people's incomes would lead to a decrease in the demand for money, shifting the money-demand curve from MD2 to MD1.

Figure 34-6 -Refer to Figure 34-6. a Shift of the Money-Demand Curve