Business, 01.12.2020 02:10 kingalex7575

Suppose that in a country politicians feel that interest rates are too high and they advocate a greater rate of growth of the money supply to decrease the interest rate. Figure (a) illustrates the effect of an increased rate of money supply growth at time period 0.
Figures (b) and (c) illustrate the effect of an increased rate of money supply growth at time period T0.
i) If a decline in interest rates is desired, in which case (a, b or c) an increase in money supply growth should be called for? Explain, why?
ii) In which case (a, b or c) a decrease in money growth is appropriate to decrease the interest rate immediately? Explain, why?
iii) If the policymakers care more about the low interest rates in the long-run, in which case (a, b or c) a decrease in money growth is appropriate? Explain, why?

Suppose that in a country politicians feel that interest rates are too high and they advocate a gre

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