Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes.
-Refer to Figure 30-3. Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

Question

Figure 30-3. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 
-Refer to Figure 30-3. Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

Quizplus · Accepted Answer

An open-market purchase of bonds by the Federal Reserve increases the money supply and shifts the MS curve to the right from MS1 to MS2. A decrease in the price level (B) or an increase in the value of money (A) would shift the money-demand curve, but not the money-supply curve. The Federal Reserve selling bonds (D) would reduce the money supply and shift the MS curve to the left.