Exhibit 20-6 Money, investment and product markets
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In Exhibit 20-6, an increase in the money supply from MS1 to MS2 causes:
A. interest rates to fall from i1 to i2 and the quantity demanded of investment to decrease from I2 to I1.
B. interest rates to fall from i1 to i2 and aggregate demand to shift from AD2 to AD1.
C. interest rates to fall from i1 to i2 and the quantity demanded of investment to increase from I1 to I2.
D. interest rates to rise from i2 to i1 and the quantity demanded of investment to remain the same.
Answer: C
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