Assume that since there is more fake counterfeit money in circulation now than there was previously, customers and businesses are increasingly reluctant to use dollar notes.

How will this shock affect the money market model and label each curve.

Determine how this rise in fake counterfeit currency affects the IS-LM model. What is the impact on Y and r.

Suppose that the Fed wishes to maintain the starting level of overall income. What type of monetary policy ought to the Fed adopt? Use the IS-LM model to demonstrate the effects of this policy.