Exhibit 20-2 Money market demand and supply curves

-Beginning from an equilibrium at E₁ in Exhibit 20-2,an increase in the money supply from $400 billion to $600 billion causes people to:

Question

Exhibit 20-2 Money market demand and supply curves
 
-Beginning from an equilibrium at E₁ in Exhibit 20-2,an increase in the money supply from $400 billion to $600 billion causes people to:

Quizplus · Accepted Answer

An increase in the money supply leads to lower interest rates, prompting people to buy bonds, which drives the price of bonds up.

Exhibit 20-2 Money Market Demand and Supply Curves