Question
If people do not anticipate a sudden increase in the growth rate of money supply, the change in the money supply will lead to
"If people do not anticipate a sudden increase in the growth rate of money supply, the change in the money supply will lead to an overall increase in interest rate if liquidity effect is smaller than the income and price-level effects." Do you agree with the above statement? Why or why not? Please also draw an appropriate diagram to show the dynamics of interest rate to justify your answers, on which you should explicitly show periods when different effects dominate.
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Get StartedRecommended Textbook for
Economics Principles and Policy
Authors: William J. Baumol, Alan S. Blinder
12th edition
978-0538453677, 538453672, 978-0538453622, 538453621, 978-0538453653
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