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Money market model and label curve

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Reference no: EM133274279

Problem:

Assume that since there is more fake counterfeit money in circulation now than there was previously, customers and businesses are increasingly reluctant to use dollar notes.

  • How will this shock affect the money market model and label each curve.
  • Determine how this rise in fake counterfeit currency affects the IS-LM model. What is the impact on Y and r.
  • Suppose that the Fed wishes to maintain the starting level of overall income. What type of monetary policy ought to the Fed adopt? Use the IS-LM model to demonstrate the effects of this policy.

Reference no: EM133274279

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