In the Liquidity Preference Framework, Demonstrate Graphically the Effect of a Decrease

question 102

Essay

In the liquidity preference framework, demonstrate graphically the effect of a decrease in the money supply. Indicate on the graph the excess demand or excess supply of money. Explain the process of adjustment that results in a change in the equilibrium interest rate, and the direction of the change in rates.

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Definitions:

Infants

Legally refers to individuals who are under the age of majority, typically considered to be 18 years in many jurisdictions, and who are thus limited in their ability to enter into contracts.

Minors

Individuals under the age of legal adulthood, which varies by country, typically recognized as under 18 or 21 years old.

Necessary

Something that is essential or required in a particular situation or for achieving a specific outcome.

Necessaries

That which is reasonably necessary for a minor’s proper and suitable maintenance, in view of the income level and social position of the minor’s family.