Question: 1.Explain how a decrease in the money supply affects the money market and the position of the aggregate-demand curve. What is the effect for a

1.Explain how a decrease in the money supply affects the money market and the position of

the aggregate-demand curve.

What is the effect for a closed economy and for

a small open economy?

2.Use the theory of liquidity preference to explain how a decrease in the money supply affects the equilibrium interest rate.

How does this change in monetary policy affect the aggregate-demand curve?

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