a.Describe how banks create money

b. If the ECB (European Central Bank) wanted to use all three of its policy tools to decrease the money supply, what would it do?

c. How does a decrease in the Ms affect the equilibrium interest rate?

d. How would this change in monetary policy affect the AD curve?

e. Suppose the government reduces spending on motorway construction by 1 billion. Which way would the AD curve shift?

f. Which effect might make the shift greater than 1 billion?

g. Which effect might make the shift less that 1 billion?