Question
Consider the money market and the exchange market. a. Construct three diagrams, show the money market in equilibrium: money demand and money supply, labelled as
Consider the money market and the exchange market. a. Construct three diagrams, show the money market in equilibrium: money demand and money supply, labelled as MD, and MS, equilibrium interest rate and quantity of money, labelled as it and Mi, and denoted as point A b. On the first diagram, show the effects of how an expansionary monetary policy by the Bank of Canada would have on each of the following: money demand and money supply, labelled as MD2 and MS? interest rate and quantity of money, labelled as 12 and M2, and denoted as point B c. On the second diagram, show the effects of how an increase in the interest rate would have on each of the following: money demand and money supply, labelled as MD, and MS; interest rate and quantity of money, labelled as is and Ms, and denoted as point C d. On the third diagram, show the effects of how a decrease in the general price level in the economy would have on each of the following: vil. money demand and money supply, labelled as MD4 and MS. interest rate and quantity of money, labelled as is and M4, and denoted as point D
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