a. Graph the demand and supply for real money in the appropriate diagram. Show how the demand changes as the nominal interest rate approaches zero. b. Suppose the interest rate is zero (or very close to zero). Show and explain what happens to the nominal interest rate if the real money supply increases.

Macroeconomics
13th Edition
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter14: Money And The Economy
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a. Graph the demand and supply for real money in the appropriate diagram.

Show how the demand changes as the nominal interest rate approaches zero.

b. Suppose the interest rate is zero (or very close to zero). Show and explain what happens to the nominal interest rate if the real money supply increases.

 

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