Figure 16-2

Multiple Choice

Figure 16-2. 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.

-Refer to Figure 16-2. Assume the money market is always in equilibrium. Under the assumptions of the model,

A) the real interest rate is higher at Y₂ than it is at Y₁.
B) the quantity of money is the same at Y₁ as it is at Y₂.
C) the price level is higher at r₂ than it is at r₁.
D) All of the above are correct.