Figure 26-3
-Refer to Figure 26-3.In the figure above,when the money supply shifts from MS1 to MS2,at the interest rate of 3 percent households and firms will
A)buy Treasury bills.
B)sell Treasury bills.
C)neither buy nor sell Treasury bills.
D)want to hold more money.

Question

Figure 26-3 
-Refer to Figure 26-3.In the figure above,when the money supply shifts from MS1 to MS2,at the interest rate of 3 percent households and firms will
A)buy Treasury bills. 
B)sell Treasury bills. 
C)neither buy nor sell Treasury bills. 
D)want to hold more money.

Quizplus · Accepted Answer

At an interest rate of 3 percent, the quantity of money demanded is greater than the quantity of money supplied. This means that households and firms will want to hold more money, so they will sell Treasury bills to increase the money supply.

Figure 26-3 -Refer to Figure 26-3.In the Figure Above,when the Money Supply