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.Assume the money market is always in equilibrium.Under the assumptions of the model,

A) the quantity of goods and services demanded is higher at P₂ than it is at P₁.
B) the quantity of money is higher at Y₁ than it is at Y₂.
C) an increase in r from r₁ to r₂ is associated with a decrease in Y from Y₁ to Y₂.
D) All of the above are correct.