Figure 34-2

Multiple Choice

Figure 34-2.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
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-Refer to Figure 34-2.As we move from one point to another along the money-demand curve MD₁,

A) the price level is held fixed at P₁.
B) the interest rate is held fixed at r₁.
C) the money supply is changing so as to keep the money market in equilibrium.
D) the expected inflation rate is changing so as to keep the real interest rate constant.