Exhibit 15.3

-Exhibit 15.3 shows equilibrium in a money market. What happens if the money supply curve shifts from S to S'_m while the rate of interest remains at i?

Question

Exhibit 15.3 -Exhibit 15.3 shows equilibrium in a money market. What happens if the money supply curve shifts from S to S'_m while the rate of interest remains at i?

Quizplus · Accepted Answer

When the money supply curve shifts from S to S', it indicates an increase in the money supply. If the interest rate remains constant, this shift results in an excess supply of money because at the original interest rate, the quantity of money supplied exceeds the quantity of money demanded.

Exhibit 15.3 -Exhibit 15.3 Shows Equilibrium in a Money Market. What Happens