Using one or more diagrams like Figures 19.2, 19.7, 19.8, 19.9 and 19.10, illustrate the following: (a)
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Using one or more diagrams like Figures 19.2, 19.7, 19.8, 19.9 and 19.10, illustrate the following:
(a) The effect of a contraction in the money supply on national income. Refer to both the interest-rate and the exchange-rate transmission mechanisms and show how the shapes of the curves affect the outcome.
(b) The effect of a fall in investment on national income. Again show how the shapes of the curves affect the outcome. Specify your assumptions about the effects on the supply of money.
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