Suppose banks install automatic teller machines on every street corner and, by making cash readily available, reduce
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Suppose banks install automatic teller machines on every street corner and, by making cash readily available, reduce the amount of money people want to hold.
a. Assume the central bank does not change the money supply. According to the theory of liquidity preference, what happens to the interest rate? What happens to AD?
b. If the central bank wants to stabilize AD, how should it respond?
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a According to the theory of liquidity preference when banks install automatic teller machines ATMs on every street corner and make cash readily avail...View the full answer
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