Figure 21-4

Multiple Choice

Figure 21-4. On the figure, MS represents money supply and MD represents money demand.
-Refer to Figure 21-4. Suppose the money-demand curve is currently MD₁. If the current interest rate is r₂, then

A) the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied.
B) people will respond by selling interest-bearing bonds or by withdrawing money from interest-bearing bank accounts.
C) bond issuers and banks will respond by raising the interest rates they offer.
D) in response, the money-demand curve will shift upward from its current position to establish equilibrium in the money market.