Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.
-Refer to Figure 30-3.Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

Question

Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.

-Refer to Figure 30-3.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, shifting the MS curve from MS₁ to MS₂. A decrease in the price level, option B, would shift the MD curve, not the MS curve. Option A, an increase in the value of money, does not make sense in this context.