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in attempt to provide stimulus to Srilanka economy, Bank Srilanka lowered its benchmark interest rate by 25bps to 4.5 percent on August 22nd of 2017.

in attempt to provide stimulus to Srilanka economy, Bank Srilanka lowered its benchmark interest rate by 25bps to 4.5 percent on August 22nd of 2017. a. What would be the effect of the monetary policy on: i. reserves in the banking system, money supply (quantity of loanable funds), and credit conditions? ii. investment and output? Demonstrate the effect in the AS/AD model! b. What are the possible disadvantages of this monetary policy? c. What would be the effect of the monetary policy on Indonesian Rupiah (IDR) exchange rate?b

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