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Question 106

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Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate Use the following to answer questions: Figure: Short-Run Determination of the Interest Rate -(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS<sub>2</sub> and the central bank sells Treasury bills, then in the short run the interest rate will: A) decrease below r<sub>2</sub>. B) remain at r<sub>2</sub>. C) increase to r<sub>1</sub>. D) fluctuate randomly.
-(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS2 and the central bank sells Treasury bills, then in the short run the interest rate will:


A) decrease below r2.
B) remain at r2.
C) increase to r1.
D) fluctuate randomly.

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