Figure 30-3.On the graph,MS represents the money supply and MD represents money demand.The usual quantities are measured along the axes. -Refer to Figure 30-3.Which of the following events could explain a shift of the money-supply curve from MS₁ to MS₂? A)an increase in the value of money B)a decrease in the price level C)an open-market purchase of bonds by the Federal Reserve D)the Federal Reserve sells bonds.

Question

Quizplus · Accepted Answer

An open-market purchase of bonds by the Federal Reserve would increase the money supply, shifting the money-supply curve to the right from MS₁ to MS₂. A decrease in the price level (choice B) would shift the money-demand curve to the left, but it would not affect the money-supply curve. An increase in the value of money (choice A) is not a clear event and would not necessarily lead to a shift in the money-supply curve. The Federal Reserve selling bonds (choice D) would decrease the money supply, shifting the money-supply curve to the left, opposite to what the question asks.