The central bank has decided to adopt one of the following money supply rules: (a) Ms =

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The central bank has decided to adopt one of the following money supply rules:

(a) Ms = kPy

(b) Ms = ky where k > 0.

Show their implications for aggregate demand in the context of (i) the IS–LM model and (ii) the IS–LM model with a zero speculative demand for money (i.e.

mR = 0). Is each of these policies viable?

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Monetary Economics

ISBN: 9780415772099

2nd Edition

Authors: Jagdish Handa

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Question Posted: Nov 12, 2024 03:00 AM

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The central bank has decided to adopt one of the following money supply rules: (a) Ms =

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Monetary Economics

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