Answer the question on the basis of the following table: $\begin{array}{c}
\begin{array}{c}
\
\text { Interest }\
\text { Rate } \
\hline 2 \% \
4 \
6 \
8 \
10
\end{array}
\begin{array}{c}
\text {Transaction}\
\text {Demand for}\
\underline{\text {Money}}\
\$ 220 \
220\
220\
220\
220
\end{array}
\begin{array}{c}
\
\text {Asset Demand }\
\underline{\text {for Money}}\
\$ 300 \
280 \
260 \
240 \
220
\end{array}
\begin{array}{c}
\
\text {Money}\
\underline{\text {Supply}}\
\$ 460 \
460\
460\
460\
460
\end{array}
\end{array}$

Refer to the given table.An increase in the money supply of $20 billion will cause the equilibrium interest rate to:
A) fall by 4 percentage points.
B) fall by 2 percentage points.
C) rise by 4 percentage points.
D) rise by 2 percentage points.

Question

Answer the question on the basis of the following table: $\begin{array}{c}
\begin{array}{c}
\
\text { Interest }\
\text { Rate } \
\hline 2 \% \
4 \
6 \
8 \
10 
\end{array}
\begin{array}{c}
\text {Transaction}\
\text {Demand for}\
\underline{\text {Money}}\
 \$ 220 \
220\
220\
220\
220
\end{array}
\begin{array}{c}
\
\text {Asset Demand }\
\underline{\text {for Money}}\
\$ 300 \
280 \
260 \
240 \
220
\end{array}
\begin{array}{c}
\
\text {Money}\
\underline{\text {Supply}}\
\$ 460 \
460\
460\
460\
460
\end{array}
\end{array}$

Refer to the given table.An increase in the money supply of $20 billion will cause the equilibrium interest rate to:
A) fall by 4 percentage points.
B) fall by 2 percentage points.
C) rise by 4 percentage points.
D) rise by 2 percentage points.

Quizplus · Accepted Answer

According to the table, an increase in the money supply leads to a decrease in the equilibrium interest rate. Specifically, a $10 billion increase in the money supply leads to a 1 percentage point decrease in the interest rate. Therefore, a $20 billion increase would cause a 2 percentage point decrease in the interest rate.

Answer the Question on the Basis of the Following Table