Suppose that the current money market equilibrium features an interest rate of 5 percent and a quantity of $2 trillion. If the Fed raises the discount rate, which of the following is most likely to be the new money market equilibrium?
A. An interest rate of 6 percent and a quantity of $1.5 trillion.
B. An interest rate of 5 percent and a quantity of $2 trillion.
C. An interest rate of 4 percent and a quantity of $2.5 trillion.
D. An interest rate of 3 percent and a quantity of $3 trillion.
Answer: A
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