According to the theory of liquidity preference

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Suppose a computer virus disables the nation’s automatic teller machines, making withdrawals from bank accounts less convenient. As a result, people want to keep more cash on hand, increasing the demand for money.

Assume the Fed does not change the money supply. According to the theory of liquidity preference, the interest rate______ , which causes aggregate demand to______ .

If instead the Fed wants to stabilize aggregate demand, it should______ the money supply by______ government bonds.

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