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Business, 18.02.2020 20:20 deduran

Suppose the money market is in the liquidity trap and the Fed increases the supply of money. We expect thata. people will end up willingly holding more money. b. the excess money holdings will flow into the loanable funds market and there will be a decrease in interest rates. c. interest rates will increase, since the demand curve for money is upward sloping in this case. d. eventually, via the transmission mechanism, Real GDP will increase.

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