The interest rate is 5 percent initially. Now the Money Supply
increases and the interest rate declines to 3.5 percent in the
short run. Let us assume two scenarios. In the first
scenario, the interest rate ends up at 4 percent in the long run,
but in the second scenario it ends up at 6 percent in the long run.
State what we are assuming about the liquidity effect (LE), income
effect (IE), price level effect (PLE), and the expected...