Business, 19.05.2020 18:57 kekerice7350

Suppose money supply is fixed at MS = 2000. Money demand is MD = 10000-4000*r, where r is the market interest rate (in percentage points). The required reserve ratio is 10% and banks don’t hold excess reserves. Individuals in this economy deposit all their money with banks. Now, the central bank prints money worth of $400. How is this going to affect the interest rate in the market? Group of answer choices Interest rate will fall 1.25 percentage points. Interest rate will rise 0.5 percentage points. None of the other answers. Interest rate will rise by 1 percentage point. Interest rate will fall 1.5 percentage points.

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Suppose money supply is fixed at MS = 2000. Money demand is MD = 10000-4000*r, where r is the market...

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