Question

In the market for money, when the Fed ________ the money stock, the money supply curve shifts to the ________ and the interest rate ________, everything else held constant.

1. decreases; left; falls
2. increases; right; falls
3. increases; left; rises
4. decreases; right; rises

Answer 1

The correct answer is option 2.

Step-by-step explanation:

Money stock is the total amount of money present in an economy at a particular point in time.

In a money market if the government increases the money stock it will cause the money supply curve to shift to the right. This rightward shift in the money supply curve will cause the interest rate to decrease.

The equilibrium quantity of money in the market will increase.