Draw a diagram of the money market and show how demand, supply and equilibrium interest rate and
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Question:
Draw a diagram of the money market and show how demand, supply and equilibrium interest rate and money quantity respond to the following (all else equal): (a) a rise in the price level (P); (b) A fall in the aggregate output of the economy (Y); (c) a fall in the required reserve ratio. Explain the rationale for each outcome in a paragraph.
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