The effectiveness of monetary policy depends on how easy it is for changes in the money supply to change interest rates. By changing interest rates, monetary policy affects investment spending and the aggregate demand curve. The economies of Albernia and Brittania have very different money demand curves, as shown in the accompanying diagram. In which economy will changes in the money supply be a more effective policy tool? Why?

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(a) Albernia MS1 Interest rate, r MD M, Quantity of money (b) Brittania MS1 Interest rate, r MD M. Quantity of money