Exhibit

Exhibit: Market for Real Money Balances Interest rate, r Supply 1'2 . . . . . .. Demand, L M2/P2 M3/P3 Real Money Balances, M/P 1. (Exhibit: Market for Real Money Balances) Based on the graph, the equilibrium levels of interest rates and real money balances are: A) ri and Mi/P1 ) 12 and My/P2 73 and M2/P2 D) 13 and M3/P3 2. (Exhibit: Market for Real Money Balances) Based on the graph, if the interest rate is ri, then people will bonds and the interest rate will A) sell; rise B) sell; fall C) buy; rise D) buy; fall