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. 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.