The following graph shows the marginal cost (MC) and marginal benefit (MB) of holding real money balances. The market is initially in equilibrium at £100. Refer to the graph to answer the question. 
Suppose the interest rate on bonds increases. Other things remaining the same, which of the following is true?
A) The new equilibrium level of real money balances will be equal to £175.
B) The marginal cost line will move from MC1 to MC2.
C) The new equilibrium level of real money balances will be equal to £200.
D) The marginal benefit line will move from MB1 to MB2.
Correct Answer:
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