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 money-demand curve is currently MD1. If the current interest rate is r2, then

A) the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied.
B) people will respond by selling interest-bearing bonds or by withdrawing money from interest-bearing bank accounts.
C) bond issuers and banks will respond by lowering the interest rates they offer.
D) in response, the money-demand curve will shift rightward from its current position to establish equilibrium in the money market.