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In: Economics

a. Using the liquidity preference model(chapter 15) for nominal interest rate determination (draw a graph), show...

a. Using the liquidity preference model(chapter 15) for nominal interest rate determination (draw a graph), show what happens to the nominal interest rate if there is an increase in real GDP and the Fed keeps the money supply unchanged.

b. Suppose the Fed did not like the outcome of the increase in real GDP on interest rates. What could the Federal Reserve do to maintain the original equilibrium interest rate?

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Expert Solution

Rahul Sunny answered 1 year ago
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