Suppose that the money market in Westlandia is initially in equilibrium and the central bank decides to decrease the money supply.

a. Using a diagram like the one in Problem 7, explain what will happen to the interest rate in the short run.

b. What will happen to the interest rate in the long run? g. An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 3% and keep it there. How could the central bank achieve this goal in the short run? What would happen in the long run? Illustrate with a diagram.