Figure 17-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.
-Refer to Figure 17-3. Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

Question

Figure 17-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.

-Refer to Figure 17-3. Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

Quizplus · Accepted Answer

An open-market purchase of bonds by the Federal Reserve would increase the money supply, causing a shift of the money-supply curve to the right from MS₁ to MS₂. An increase in the value of money (A) would decrease the money supply and shift the curve to the left. A decrease in the price level (B) would not necessarily shift the money supply curve, but it would cause a movement along the curve to a lower point.