BN Figure 39.2 Alternative Money Demand Curves MS MS, INTEREST RATE MD QUANTITY OF MONEY 3. Suppose there are two money demand curves MD and MD, and the Fed increases the money supply from MS to MS, as shown in Figure 39.2. (A) Compare what happens to the interest rate with each MD curve. (B) Explain the effect of the change in the money supply on consumption, investment, real output and prices. Would there be a difference in the effects under the two different money demand curves? If so, explain. (C) How would you describe, in economic terms, the difference between the two money demand curves? (D) If the Federal Reserve is trying to get the economy out of a recession, which money demand curve would it want to represent the economy? Explain