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Figure 15.1 Money Money Money supply! supply: supply3 65 100 135 QUANTITY OF MONEY RATE OF INVESTMENT (billons of dollars) (billons of dollars) ederal Reserve

Figure 15.1 Money Money Money supply! supply: supply3 65 100 135 QUANTITY OF MONEY RATE OF INVESTMENT (billons of dollars) (billons of dollars) ederal Reserve sets the quantity of money at Money supply 2 The equilibrium interest Assume the F percent and the equilibrium quantity of money is rate is Suppose the Federal Reserve increases the money supply by $35 billion. The new equilibrium interest rate is percent. As a result of the (increase, decrease) in the interest rate, the rate of investment will (increase, decrease) to ____________.

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