Exhibit 16-5 Money, Investment and Product Markets

Exhibit 16-5 Money, investment and product markets

In Exhibit 16-5, when the money supply increases from MS₁ to MS₂, the equilibrium interest rate:

A) decreases from i₁ to i₂, decreasing investment spending from I₂ to I_1.
B) increases from i₂ to i₁, increasing investment spending from I₁ to I₂.
C) increases from i₂ to i₁, decreasing investment spending from I₂ to I₁.
D) decreases from i₁ to i₂, increasing investment spending from I₁ to I₂.