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(a) List two factors that are responsible for a decrease in money demand.
(b) In the figure above, after the decrease in money demand and the shift of the money demand curve from 1 d M to 2 d M , what happens to the equilibrium interest rate? Explain the change in the equilibrium interest rate by using i1 and i2. Also, what happens to the equilibrium quantity of money after the shift of the money demand curve? Answer the question whether it changes or remains at the same level.
This document contains various important questions and their appropriate answers in the subject field of Economics.
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