Figure 11-1 -Refer to Figure 11-1. Suppose the Fed Takes Action That

Multiple Choice

Figure 11-1
-Refer to Figure 11-1. Suppose the Fed takes action that shifts the demand curve from S to S′, as illustrated in Panel (b) . What happens to the interest rate?

A) It increases.
B) It decreases.
C) It remains unchanged.
D) Short-term interest rates will increase but long-term interest rates will decrease.