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Suppose the economy is initially in equilibrium at point 3, and the federal reserve takes actions to expand the money supply, while nothing else changes.

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Suppose the economy is initially in equilibrium at point 3, and the federal reserve takes actions to expand the money supply, while nothing else changes. What would be the new equilibrium? Interest rate MS, MS? 1 3 4 5 6 MD, MD 3 MD Money Figure 2: A model showing the money market, which determines the equilibrium interest rate on savings, as according to Keynes's theory of liquidity preference

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