Refer to the diagram of the market for money. The vertical money supply curve $S _ { m }$ re?ects the fact that
A) bond prices and interest rates are inversely related.
B) the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes.
C) the rate at which money is spent is zero.
D) lower interest rates result in lower opportunity costs of supplying money.

Question

Refer to the diagram of the market for money. The vertical money supply curve $S _ { m }$ re?ects the fact that
A) bond prices and interest rates are inversely related. 
B) the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes. 
C) the rate at which money is spent is zero. 
D) lower interest rates result in lower opportunity costs of supplying money.

Quizplus · Accepted Answer

The vertical money supply curve reflects the fact that the stock of money is determined by the Federal Reserve System and does not change when the interest rate changes. This means that the supply of money is fixed in the short run, and any changes in the interest rate will only result in movements along the curve, rather than a shift in the curve.

Refer to the Diagram of the Market for Money SmS _ { m }Sm​

Refer to the Diagram of the Market for Money $S _ { m }$