Exhibit 16-3 Money Market Demand and Supply Curves in Exhibit

Exhibit 16-3 Money market demand and supply curves In Exhibit 16-3, assume an equilibrium with an interest rate of 15 percent and the money supply at $100 billion. The Fed uses its policy tools to move the economy to a new equilibrium at E₂ with money supply of $150 billion and an interest rate of 10 percent. This change could be the result of a(n) :

A) open market sale of securities by the Fed.
B) higher discount rate set by the Fed.
C) higher required-reserve ratio set by the Fed.
D) open market purchase of securities by the Fed.