Refer to the following figure when answering the following questions.
Figure 12.12: Money Market
-Starting at any equilibrium in Figure 12.12, if individuals want to hold more wealth in savings, the money market would move from point:
A) B to A.
B) B to C.
C) B to D.
D) A to C.
E) Not enough information is given.

Question

Refer to the following figure when answering the following questions.
Figure 12.12: Money Market 
-Starting at any equilibrium in Figure 12.12, if individuals want to hold more wealth in savings, the money market would move from point:
A) B to A. 
B) B to C. 
C) B to D. 
D) A to C. 
E) Not enough information is given.

Quizplus · Accepted Answer

Individuals holding more wealth in savings means there is an increased demand for money which shifts the demand curve to the right, leading to a higher interest rate (point D). As a result, the quantity of money supplied will increase, leading to a new equilibrium at point C.

Refer to the Following Figure When Answering the Following Questions