Refer to the diagram below. Which of the following is associated with the change shown on the diagram?

Question

BlackTom AI · Accepted Answer

An increase in the money supply shifts the (vertical) money-supply curve to the right, so...

Relevant concepts:
- Money market diagram: vertical money supply (set by the central bank) and downward‑sloping money demand (higher interest rates reduce quantity demanded).
- A rightward shift of the money-supply curve = an increase in the quantity of money supplied at every interest rate.
- Monetary policy: expansionary policy increases money supply (more liquidity, lower interest rates); contractionary policy decreases money supply (less liquidity, higher interest rates).

Step‑by‑step reasoning:
1. Identify the curves and axes: vertical blue lines are Money supply0 and Money supply1; the purple line is Demand for money; vertical axis is interest rate, horizontal axis is quantity of money.
2. The supply curve has moved from Money supply0 to Money supply1 (rightward). That indicates an increase in money supply.
3. With supply increased, the new equilibrium lies further right along the demand curve and at a lower interest rate (movement down the demand curve). Thus liquidity increases and interest rates fall.
4. Increasing the money supply and lowering interest rates is precisely what central banks do under expansionary monetary policy (e.g., open market purchases, lowering the policy/cash rate target).

Why the correct answer is correct:
- Option d (“Expansionary monetary policy”) describes a policy that increases the money supply, matching the rightward shift shown. The diagram shows more money in circulation and a lower equilibrium interest rate — the textbook effect of expansionary policy.

Why the other options are incorrect:
- a. “A decrease in the amount of money circulated” is the opposite of what the diagram shows (the supply moved right, not left).
- b. “Contractionary monetary policy” would shift money supply left and raise interest rates, not right and lower them.
- c. “A higher cash rate” contradicts the diagram, because the interest/cash rate falls when money supply increases.

Conclusion: The diagram displays an increase in money supply and a resulting lower interest rate, so the correct answer is d. Expansionary monetary policy.

Refer to the diagram below. Which of the following is associated with the change shown on the diagram?单项选择题

类似问题

Refer to the diagram below. Which of the following is associated with the change shown on the diagram?

Go to: https://www.rba.gov.au/monetary-policy/about.html When does the RBA make its cash rate decision?

Which of the following is an example of monetary policy?

When the RBA is trying to control rising inflation, it:

Finish this sentence: When the RBA decides to increase the cash rate,

Go to: https://www.rba.gov.au/monetary-policy/about.html When does the RBA make its cash rate decision?

What is the duty of the Reserve Bank of Australia (RBA)?

Which of the following is not a strength of using monetary policy as a tool to achieve macroeconomic goals?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单