Suppose that the money market in Westlandia is initially in equilibrium and the central bank decides to
Question:
a. Using a diagram like the one in Problem 7, explain what will happen to the interest rate in the short run.
b. What will happen to the interest rate in the long run?
Diagram Problem 7
Transcribed Image Text:
Interest MS1 rate, r E1 MD1 Quantity of money M.
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a In the shortrun the money supply curve will shift to the left to MS 2 a...View the full answer
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Related Book For
Macroeconomics
ISBN: 978-1319120054
3rd Canadian edition
Authors: Paul Krugman, Robin Wells, Iris Au, Jack Parkinson
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