Draw a graph of money demand and money supply

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Draw a graph of money demand and money supply with the nominal interest rate on the vertical axis and money balances on the horizontal axis. Assume the central bank is following a money growth rule where it sets the growth rate of money supply to zero.

Use the graph to illustrate how fluctuations in velocity imply that targeting money growth results in greater volatility of interest rates.

Reference no: EM131223202

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