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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Suppose the money supply rises. Is the interest rate guaranteed to decline initially? Why or why not?

To determine

The interest rate.

Explanation

No, it is not guaranteed that an increase in the money supply would lead to a fall in the interest rate. This is due to the reason that a change in the money supply would lead to a change in real GDP, price level, and the expected rate of inflation...

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