Figure 4.3

-In Figure 4.3,the decrease in the interest rate from i? to i? can be explained by
A) a decrease in money growth.
B) an increase in money growth.
C) a decline in the expected price level.
D) only A and B of the above.

Question

Figure 4.3
 
-In Figure 4.3,the decrease in the interest rate from i? to i? can be explained by
A) a decrease in money growth. 
B) an increase in money growth. 
C) a decline in the expected price level. 
D) only A and B of the above.

Quizplus · Accepted Answer

The decrease in the interest rate from i? to i? can be explained by an increase in money growth, which leads to more money supply in the market and thus, decreases the demand for money, lowering the interest rates. A decrease in money growth (option A) would have the opposite effect, raising the interest rates. A decline in the expected price level (option C) may also affect the interest rates, but it is not the most likely explanation for the observed change in this scenario. Therefore, the correct answer is B, as it best explains the given situation.

Figure 4.3 -In Figure 4.3,the Decrease in the Interest Rate from I