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ECON 471 Financial Markets and Institutions Practice Problems Suppose that the central bank increases the money supply, and the liquidity effect is greater than the

ECON 471 Financial Markets and Institutions Practice Problems

Suppose that the central bank increases the money supply, and the liquidity effect is greater than the other effects.

A) Does the demand for money shift left, shift right, or stay the same? Why?

B) Does the supply of money shift left, shift right, or stay the same? Why?

C) Does the interest rate increase, decrease, or stay the same? Why?

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