Dicuss effect of monetary policy on interest rate in economy

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Reference no: EM131481628

Question: Many people focus on the effect of monetary policy on interest rates in the economy.

a. Use the loanable funds market to explain how unexpected contractionary monetary policy affects interest rates in the short run.

b. Now explain how these changes affect aggregate demand and supply in both the short run and the long run. Be sure to also explain the changes in real GDP, the unemployment rate, and the price level.

Reference no: EM131481628

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