1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply...

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1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS- MD graph changes due to the given events and as a result how the equilibrium interest rate changes. (In your answer you should clearly state and show what happens to the MS and MD curves and also what happens to the interest rate). a) The Fed raises the discount rate. b) GDP decreases. 1. For each of the following questions, draw the Money Demand curve (MD) and Money Supply curve (MS) and label the equilibrium interest rate as i*. Also show how the MS- MD graph changes due to the given events and as a result how the equilibrium interest rate changes. (In your answer you should clearly state and show what happens to the MS and MD curves and also what happens to the interest rate). a) The Fed raises the discount rate. b) GDP decreases.

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1a The Fed raises the discount rate When the Fed raises the discount rate the money suppl... View the full answer