Refer to the information provided in Figure 11.4 below to answer the questions that follow.
Figure 11.4
-Refer to Figure 11.4.At an interest rate of 8%,firms and households

Question

Refer to the information provided in Figure 11.4 below to answer the questions that follow.
  Figure 11.4
-Refer to Figure 11.4.At an interest rate of 8%,firms and households

Quizplus · Accepted Answer

According to the figure, at an interest rate of 8%, the demand for money (represented by Md) is less than the supply of money (represented by Ms). This means that firms and households are holding more money than they desire. To achieve their desired level of money holdings, they will attempt to reduce their holdings of money by buying bonds, which will increase the demand for bonds and decrease their interest rate, ceteris paribus.

Refer to the Information Provided in Figure 11