What happens to the money demand and interest rates

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In 1999, there was broad concern about the Y2K computer problem. Banks, and the Fed, predicted that many people would want to hold additional cash in case software glitches blocked access to their bank accounts on January 1, 2000. (a) What happens to the money demand and interest rates if people want to increase their holdings of cash and the Fed does not do anything? (b) Now, imagine that the Fed attempts to keep the federal funds rate constant. What are the consequences for the money supply? (Use a money supply and demand diagram for your answers)

Reference no: EM131242538

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