Use the following to answer questions :
Figure: Money Market I
-(Figure: Money Market I) Look at the figure Money Market I. If the money market is initially in equilibrium at point E and the central bank sells Treasury bills, then the interest rate will:

Question

Use the following to answer questions :
Figure: Money Market I 
-(Figure: Money Market I) Look at the figure Money Market I. If the money market is initially in equilibrium at point E and the central bank sells Treasury bills, then the interest rate will:

Quizplus · Accepted Answer

When the central bank sells Treasury bills, it decreases the money supply, leading to an increase in the interest rate, moving the equilibrium toward point H.

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