Question: 2. Problems and Applications Q2 Suppose that changes in bank regulations reduce the availability of credit cards so that people need to hold more cash.

2. Problems and Applications Q2 Suppose that changes in bank regulations reduce the availability of credit cards so that people need to hold more cash. Show how this event affects the demand for money. Demand Supply Value of Money (1/P) Quantity of Money Demand Supply If the Fed does not respond to this event, the price level will . True or False: If the Fed wants to keep the price level stable, it should increase the money supply. True False

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