1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS- MD graph changes due to the given events and as a result how the equilibrium interest rate changes. (In your answer you should clearly state and show what happens to the MS and MD curves and also what happens to the interest rate). a) The Fed raises the discount rate.
1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS- MD graph changes due to the given events and as a result how the equilibrium interest rate changes. (In your answer you should clearly state and show what happens to the MS and MD curves and also what happens to the interest rate). a) The Fed raises the discount rate.
Chapter20: Monetary Policy
Section: Chapter Questions
Problem 4SQP
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Transcribed Image Text:Econ 202
Name:
Applied Problems on Monetary Policy and Interest Rates
1. For each of the following questions, draw the Money Demand curve (MD) and Money
Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS-
MD graph changes due to the given events and as a result how the equilibrium interest
rate changes. (In your answer you should clearly state and show what happens to the MS
and MD curves and also what happens to the interest rate).
a) The Fed raises the discount rate.
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