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Investment demand and the market for money are shown in the graphs below. If the economy has a recessionary gap of $100 billion and the

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Investment demand and the market for money are shown in the graphs below. If the economy has a recessionary gap of $100 billion and the MPC is 0.8 , what level of the money supply should the central bank target if it wants to bring real GDP back to the full-employment level? Demonstrate your answer graphically. Instructions: Use the tool provided ' Sm2 ' to draw the new moncy supply curve. Use the graph on the right to plot your line such that the first point touches the horizontal axis. Investment Demand Amount of investment (billions of dollars) The Market for Money Tools Sm2 Money demanded and supplied (billions of dollars)

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