How Monetary Policy Affects the Interest Rate?
If we hold demand for money constant, then the interest rate can be changed by changes in money supply via monetary policy.
When monetary policy expands the money supply, the interest rate falls. When monetary policy contracts the money supply, the interest rate rises.
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A) the long-run aggregate supply curve has to shift to the left. B) the aggregate demand curve has to shift to the left. C) the long-run aggregate supply curve has to shift to the right. D) the aggregate demand curve has to shift to the right.
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