In the money market shown in the diagram above, which statement concerning this
ID: 2440911 • Letter: I
Question
In the money market shown in the diagram above, which statement concerning this diagram is likely to be true?
The Federal Reserve has decreased the supply of money using monetary policy..
The Federal Reserve has increased the demand of money using monetary policy.
The Federal Reserve has decreased the demand of money using monetary policy.
The Federal Reserve has increased the supply of money using monetary policy.
The Federal Reserve has lowered interest rates to increase the demand for money.
A.The Federal Reserve has decreased the supply of money using monetary policy..
B.The Federal Reserve has increased the demand of money using monetary policy.
C.The Federal Reserve has decreased the demand of money using monetary policy.
D.The Federal Reserve has increased the supply of money using monetary policy.
E.The Federal Reserve has lowered interest rates to increase the demand for money.
The Interest Ms1 Ms 2 Rate 5% 3% Md $900 $1,000 Quantity of Money (Billions of Dollars)Explanation / Answer
Ans: The Federal Reserve has increased the supply of money using monetary policy.
Explanation:
In the above diagram, it is seen from the red arrow mark, that money supply increases from $900 billion to $1000 billion. The Fed can increase money supply by using monetary policy. Thus, option [D] is true.
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