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Consider an unexpected increase in demand for money in the

Question - Consider an unexpected increase in the demand for money in the economy. The increase in the demand for money implies an increase in interest rates.

(a) What are the short run effects on price level and output?

(b) Suppose the Central Bank cares only about keeping the price level stable. What should the Central Bank do?

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Accounting Basics: Consider an unexpected increase in demand for money in the

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