Exhibit 15-8
-In Exhibit 15-8,the demand for money is represented by D₁ and the supply by S₁.If the Fed raises the discount rate,the equilibrium will move from

Question

Exhibit 15-8 -In Exhibit 15-8,the demand for money is represented by D₁ and the supply by S₁.If the Fed raises the discount rate,the equilibrium will move from

Quizplus · Accepted Answer

Raising the discount rate makes borrowing more expensive, which reduces the quantity of money demanded. This shifts the demand curve to the left, from D1 to D2. The new equilibrium is at point B, where the quantity of money demanded equals the quantity of money supplied.

Exhibit 15-8 -In Exhibit 15-8,the Demand for Money Is Represented by D1

Exhibit 15-8 -In Exhibit 15-8,the Demand for Money Is Represented by D₁