Question 5 25 pts Draw graphs and explain in no more than five sentences the effects on the equilibrium real interest rate (r) and equilibrium quantity demanded of real money (M/P) of the following monetary policy, or change in the market for real goods and services. Assume that cash and government bonds are the only financial assets in the money or financial market. Note that M is nominal money supply, P is aggregate price level of real goods and services, and Y is aggregate real income, real output, or real GDP. A. The central bank lowers the reserve requirement ratio on banks at time t = 2. All other variables are assumed to be constant (i.e. P = P1 = P2, Y=Y1=Y2). Assume that the initial equilibrium real interest rate is r1, and equilibrium quantity demanded of real money is M1/P, at time t = 1. Upload Choose a File Previous Next