Using a figure similar to Figure 15A-1, explain how the money market and the loanable funds market
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Figure 15A-1.
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(a) The Liquidity Preference Model of the Interest Rate (b) The Loanable Funds Model of the Interest Rate Interest rate, i Interest rate, i In the short run, an increase in the MS2 money supply reduces MS, the interest rate... .. which leads to a short-run increase in real GDP and an increase in the supply of loanable funds. E2 E2 MD Quantity of money Quantity of loanable funds
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Related Book For
Macroeconomics
ISBN: 978-1319120054
3rd Canadian edition
Authors: Paul Krugman, Robin Wells, Iris Au, Jack Parkinson
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