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Use the money market model to conduct the following analysis. For each of the following events,...

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Economics

Use the money market model to conduct the following analysis.For each of the following events, (i) say which curve shifts, (ii)say in which direction it shifts, and (iii) say in which directionthe equilibrium interest rate changes.

a. Stock prices fall significantly.

b. The U.S. price level rises.

c. The Fed engages in an open market sale of bonds.

d. Credit card fraud becomes a major problem and people startmaking more payments using money.

Answer & Explanation Solved by verified expert
4.1 Ratings (515 Votes)
Keynes developed a money market to determine interest rateInterest rate is what makes money demand and supply equal Heconsiders his liqudity preference theory as the basis of thismodel real money supply is not dependent on interest rateSo it isvertical as shown belowa what happens when stock prices fall significantly investorsin stock market will be more pesisimist    See Answer
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