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9 . Money Supply Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to

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9 . Money Supply

Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent.

Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium.

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