Figure 26-3

-Refer to Figure 26-3.In the figure above,the movement from point A to point B in the money market would be caused by
A) an increase in the price level.
B) a decrease in real GDP.
C) an open market sale of Treasury securities by the Federal Reserve.
D) a decrease in the required reserve ratio by the Federal Reserve.

Question

Figure 26-3
 
-Refer to Figure 26-3.In the figure above,the movement from point A to point B in the money market would be caused by
A) an increase in the price level. 
B) a decrease in real GDP. 
C) an open market sale of Treasury securities by the Federal Reserve. 
D) a decrease in the required reserve ratio by the Federal Reserve.

Quizplus · Accepted Answer

An open market sale of Treasury securities by the Federal Reserve would decrease the supply of money in the economy, causing the interest rate to increase and leading to a movement from point A to point B in the money market. A, B, and D are incorrect choices because they do not directly affect the supply of money in the economy. An increase in the price level (A) would lead to an increase in the demand for money and a movement to the right along the money demand curve, but it would not shift the money supply curve. A decrease in real GDP (B) would also lead to a decrease in the demand for money and a movement to the left along the money demand curve, but it would not shift the money supply curve. Finally, a decrease in the required reserve ratio (D) would increase the supply of money in the economy, leading to a movement from point A to point C in the money market.

Figure 26-3 -Refer to Figure 26-3.In the Figure Above,the Movement from Point