Stabilizing aggregate demand

Reference no: EM1374225

Assume banks install ATM on every block and, through making cash readily available, decrease the value of money people want to hold.

[A] Suppose the Fed does not change the money supply. According to the theory of liquidity preference, what happens to the interest rate? What happens to aggregate demand?
[B] If the Fed wants to stabilize aggregate demand, how should it respond?

Reference no: EM1374225

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