Depicts the money demand and supply curves

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The graph below depicts the money demand and supply curves.

1. Suppose the central bank decides to reduce the interest rate paid to banks on reserves. Use the money market graph to show the change in the money supply as a result of this policy action. Instructions: Use the tool provided "MS,2" to show the new money supply curve. Plot only the endpoints of the line.

2. How has the market interest rate adjusted due to this interest rate policy? multiple choice 1 Market interest rates have decreased. Market interest rates have increased. Incorrect Market interest rates remain unchanged. c. An increase in the interest rate paid to banks on reserves held at the central bank would be most useful multiple choice 2 during a period of high inflation. during a recession. Correct both during high inflation and during a recession.

Reference no: EM133629724

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