Question

nts Save. 0.5 poi QUESTION 4 Graph B Graph A 009 0.09 006 004 001 004 500 90OD 9500 30000 30500 33000 100 Quantity of Money Qanity of Money Graph D Graph C o08 ooi 004 Which of the four graphs shows how the money market equilibrium would be affected if the Federal Reserve were to sell securities? (Assume point A represents the initial equilibrium).

Answer 1

Q4. Which of the following four graphs shows how the money market equilibrium would be affected if the Federal Reserve were to sell securities? (Assuming point A represent the initial equilibrium)

Answer: Graph B

Explanation: We know that when the Federal Reserve wants money to be taken out of the system, the Fed sells the securities. When the Fed will sell the securities the money in circulation will decrease and it will lead to a decrease in the money supply resulting in the money supply curve shift to leftward and the equilibrium point shifts from point A to point B. This is shown by Graph B. Hence the answer is Graph B.