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 MD₂. If the current interest rate is r₂, then

A) in response, the money-demand curve will shift downward from its current position to establish equilibrium in the money market.
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 lowering the interest rates they offer.
D) there is a surplus of money.