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5. The following are money demand and money supply functions in an economy: MS = (8, 000 and Ma = ( 40, 000(0. 25 -

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5. The following are money demand and money supply functions in an economy: MS = (8, 000 and Ma = ( 40, 000(0. 25 - r); suppose that P the price level is equal to one. a. Calculate the equilibrium interest rate b. Suppose that the central bank raises the equilibrium interest rate to 10%, will there be excess money supply or excess money demand? What monetary policy should be followed to reach the new equilibrium interest rate

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