Consider the money market drawn with the value of money on the vertical axis.If money demand is unchanged and the price level rises,then
A)the money supply must have increased,perhaps because the Fed bought bonds.
B)the money supply must have increased,perhaps because the Fed sold bonds.
C)the money supply must have decreased,perhaps because the Fed bought bonds.
D)the money supply must have decreased,perhaps because the Fed sold bonds.

Question

Quizplus · Accepted Answer

If money demand is unchanged and the price level rises, then the real value of money has fallen. To offset this, the money supply must have increased, perhaps because the Fed bought bonds.

Consider the Money Market Drawn with the Value of Money