Figure 15.2

-Consider the money market described in Figure 15.2. The decrease in the money supply from MS₁to MS₂results in all of the following except

Question

Figure 15.2 -Consider the money market described in Figure 15.2. The decrease in the money supply from MS₁to MS₂results in all of the following except

Quizplus · Accepted Answer

The decrease in the money supply will result in a higher interest rate and lower bond prices, making it more expensive for people to borrow money. This, in turn, will lead to a smaller quantity of money demanded. However, a decrease in the money supply will not result in a higher transactions demand for money, as people will have less money to spend. Therefore, the correct answer is E, a higher transactions demand for money, is not a consequence of the decrease in money supply.

Figure 15.2 -Consider the Money Market Described in Figure 15.2. the Decrease