Figure 16-5. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 16-5. A shift of the money-demand curve from MD₁ to MD₂ could be a result of A) a decrease in taxes. B) an increase in government spending. C) an increase in the price level. D) All of the above are correct.

Question

Quizplus · Accepted Answer

An increase in government spending and a decrease in taxes both increase the demand for money, shifting the money-demand curve to the right. An increase in the price level decreases the demand for money, shifting the money-demand curve to the left.