Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the
A) S curve would shift leftward and the equilibrium interest rate would rise.
B) S curve would shift rightward and the equilibrium interest rate would fall.
C) D3 curve would shift leftward and the equilibrium interest rate would fall.
D) D3 curve would shift leftward and the equilibrium interest rate would rise.

Question

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the
A) S curve would shift leftward and the equilibrium interest rate would rise. 
B) S curve would shift rightward and the equilibrium interest rate would fall. 
C) D3 curve would shift leftward and the equilibrium interest rate would fall. 
D) D3 curve would shift leftward and the equilibrium interest rate would rise.

Quizplus · Accepted Answer

According to the market-for-money diagram, an increase in the stock of money would shift the S curve rightward. This would lead to an increase in the quantity of money demanded and a decrease in the equilibrium interest rate. Therefore, the correct answer is B.

Refer to the Given Market-For-Money Diagrams