Refer to the diagrams. The numbers in parentheses after the AD 1 , AD 2 , and AD 3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. Which of the following would shift the money supply curve from MS 1 to MS 3 ?

A. An increase in the discount rate.
B. Purchases of U.S. securities by the Fed in the open market.
C. Sales of U.S. securities by the Fed in the open market.
D. An increase in the reserve ratio.

answer:

B. Purchases of U.S. securities by the Fed in the open market.