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The graphs below shows the information for the economy of Heart. a. In graph A, illustrate the effect of an increase in money supply, which
The graphs below shows the information for the economy of Heart. a. In graph A, illustrate the effect of an increase in money supply, which reduces the interest rate to 5 percent, and in graph B, the effect of the lower interest rate on the level of investment spending. Plot only the endpoints of line M82 in graph A. Then plot the new equilibrium. In Graph B, plot the new equilibrium. A / 9 [E '2 New 8 equilibrium 7 1;; a 9 353 5 \"5 (5.5.5) .9 4 m n: 3 2 1 0 Quantity of money w- m \fb. What is the new level of investment spending? $:| c. Suppose that for each $1 change in investment, aggregate demand changes by $4. Show the effect of this change in investment spending in graph C. Plot only the endpoints of line AD2 c / AD2 Price level 100 200 300 400 500 600 700 800 900 100011001200 Real GDP w- m
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