Figure 34-4

Multiple Choice

Figure 34-4.On the figure,MS represents money supply and MD represents money demand.
-Refer to Figure 34-4.Suppose the current equilibrium interest rate is r₃.Let Y₃ represent the corresponding quantity of goods and services demanded,and let P₃ represent the corresponding price level.Starting from this situation,if the Federal Reserve decreases the money supply and if the price level remains at P₃,then

A) there will be an increase in the equilibrium quantity of goods and services demanded.
B) there will be a decrease in the equilibrium interest rate.
C) the aggregate-demand curve will shift to the right.
D) fewer firms will choose to borrow to build new factories and buy new equipment.