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 real interest rate is lower 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 lower at r₂ than it is at r₁. D)All of the above are correct.

Question

Quizplus · Accepted Answer

In the money market equilibrium, the quantity of money is determined by the money supply, which is assumed to be constant, so it remains the same at different income levels Y₁ and Y₂.