II Question 1 [6 points] Suppose the central bank decides to use its power tp set interest rates oons1ant. Use the money market diagram below to show what happens to the demand for money and answer what happens to the money supply and interest rates if real ou1put decreases. a) Show what happens to the demand for money In the money market dIagram. v Mony Demand Curve E If m 2 JR 5 0 i I i i i i i I i I i I ' I ' 10 20 30 40 50 60 70 i Real Money Balances M/P b) Fill in the blanks with their appmpriate movements in the following statement, In this srluatmn' the money supplywnl ecrease Ofcial Time: 12:15:19 not change I SUBMIT AND