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Targeted money supply

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Reference no: EM132606948

Suppose the Bank Negara Malaysia is using an interest rate as an intermediate target while real income is the ultimate policy target. There is a drop in autonomous business investment that the central bank had not anticipated. Use the IS-LM model to show the effect of this shock. Would it have been better if the central bank had targeted money supply? Discuss.

Reference no: EM132606948

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