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Quantity of money and the interest rate

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Reference no: EM132001253

One problem that Japan faced in fighting deflation is what Keynesian economists refer to a "Liquidity trap" where monetary policy is ineffective. On the graph of the market for money for Japan to the right, show what would happen if the Bank of Japan eased monetary policy to fight the recession and deflation. Label and show what would happen to the quantity of money and the interest rate in Japan on the graph.

Reference no: EM132001253

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