a. Show that a given change in the money stock has a larger effect on output the less  interest-sensitive is the demand for money. Use the formal analysis of Section 10-5.  
 
b. How does the response of the interest rate to a change in the money stock depend on the  interest sensitivity of money demand?

Answer rating: 100% (QA)

According to many theories of macroeconomics a rise within the supply of cash should lower interest rates within the economy a rise within the pecuniary resource implies that extra money is obtainable ... View the full answer