Illustrate what would be effect of policy described

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Reference no: EM1371299

Q. Assume that economy's real GDP is growing.

a. Illustrate what will happen to money demand over time?

b. If Fed leaves money supply unchanged, illustrate what will happen to interest rate over time?

c. If Fed changes money supply to match change in money demand, illustrate what will happen to interest rate over time?

d. Illustrate what would be effect of policy described in part (c) on economy's stability over business cycle?

Reference no: EM1371299

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