Figure 11-1
-Refer to the Figure 11-1.What happens when the money supply curve shifts from MS1 to MS2?
A) The demand for goods and services decreases.
B) The economy's ability to produce goods and services increases.
C) The equilibrium price level increases.
D) The equilibrium value of money increases.

Question

Figure 11-1 
-Refer to the Figure 11-1.What happens when the money supply curve shifts from MS1 to MS2?
A) The demand for goods and services decreases. 
B) The economy's ability to produce goods and services increases. 
C) The equilibrium price level increases. 
D) The equilibrium value of money increases.

Quizplus · Accepted Answer

When the money supply curve shifts from MS1 to MS2, there is an increase in the money supply. This leads to a decrease in the interest rate, which in turn increases investment and consumption. As a result, there is an increase in demand for goods and services, which leads to an increase in the equilibrium price level. Therefore, the correct choice is C.

Figure 11-1 -Refer to the Figure 11-1.What Happens When the Money Supply