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Question 136

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Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate Use the following to answer questions: Figure: Short-Run Determination of the Interest Rate -(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS<sub>2</sub> and the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r<sub>1</sub>. In the long run prices will _____ thereby _________ the demand for money. A) decrease, decreasing B) decrease, increasing C) increase, decreasing D) increase, increasing
-(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate. If the money supply is at MS2 and the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r1. In the long run prices will _____ thereby _________ the demand for money.


A) decrease, decreasing
B) decrease, increasing
C) increase, decreasing
D) increase, increasing

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