Consider the general equilibrium effects of monetary policy in a closed economy. If M decreases, the...

Consider the general equilibrium effects of monetary policy in a closed economy. If M decreases, the IS curve will ; the FE curve will ; and the LM curve will ; and r* will and y* will . Note: For each of the above blanks, fill in one of the following three choices: A. move to the right; B. move to the left; C. stay; D. increase; E. decrease.

Expert Solution

IF the money supply in the market decreases then IS curve will remain as it is i.e. stay,

The Fe curve will remain as it is i.e. stay,

The Lm curve will shift to the left,

THe R or the interest rate will increase and Y will decrease.

Rahul Sunny answered 2 years ago

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