6. Show the effect on the equilibrium interest rate of a decrease in the price level....

6. Show the effect on the equilibrium interest rate of a decrease in the price level. Show using the graph for the nominal money market. Clearly state what happened to the equilibrium interest rate. (5 pts.)

Expert Solution

Monetary policies plays an important role. It can impact the supply of money and so the interest rate. Increase money supply decrease the interest rate and decrease money supply increases increases interest rates.

Rahul Sunny answered 2 years ago

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