Figure 21-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 21-4. Suppose the money-demand curve is currently MD₁. If the current interest rate is r₂, then A)the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied. B)people will respond by selling interest-bearing bonds or by withdrawing money from interest-bearing bank accounts. C)bond issuers and banks will respond by raising the interest rates they offer. D)in response, the money-demand curve will shift upward from its current position to establish equilibrium in the money market.

Question

Quizplus · Accepted Answer

When the interest rate is r2 and the money-demand curve is MD1, the quantity of money demanded is less than the quantity supplied, leading to an excess supply of money.