Long-run effects of an unexpected decrease in money supply

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a) Use the IS-LM, AD-AS model to illustrate the short-run and long-run effects of an unexpected decrease in the money supply. [Assume that the economy moves immediately to the new intersection of the IS & LM curves.]

b) Repeat part a assuming that the decrease in the money supply is expected and expectations are rational

Reference no: EM13771345

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