Refer to the information provided in Figure 11.5 below to answer the questions that follow.
Figure 11.5
-Refer to Figure 11.5.The money supply curve will shift from to if

Question

Refer to the information provided in Figure 11.5 below to answer the questions that follow.
  Figure 11.5
-Refer to Figure 11.5.The money supply curve will shift from to if

Quizplus · Accepted Answer

When the Fed buys U.S. government securities in the open market, it adds reserves to the banking system, which leads to an increase in the money supply. This shifts the money supply curve from MS1 to MS2. A, B, and C do not directly affect the money supply curve. Increasing the reserve requirement and discount rate may lead to a decrease in the money supply through the multiplier effect, but this is an indirect impact. An increase in the equilibrium level of output does not directly affect the money supply.

Refer to the Information Provided in Figure 11