Figure 22-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.
-Refer to Figure 22-3.Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂?

Question

Figure 22-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes.

-Refer to Figure 22-3.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 to the right from MS₁ to MS₂. An increase in the value of money (Option A) would shift the money-demand curve to the left and would not affect the money-supply curve. A decrease in the price level (Option B) would also shift the money-demand curve to the left and lead to an increase in the real money supply, but it would not directly affect the nominal money supply or the money-supply curve.