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.

-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.