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(3) The money supply is xed at $60billion and the equilibrium value of money 1/P = 1/2. The Federal Reserve increases the money supply by

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(3) The money supply is xed at $60billion and the equilibrium value of money 1/P = 1/2. The Federal Reserve increases the money supply by $20 billion and as a result the new equilibrium price level is 5. Use the Money Supply-Demand Model (Diagram) to await: clearly how equilibrium is restored in the model

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