-The Figure Above Shows the Demand for Money in Kiteland

question 49

Essay

-The figure above shows the demand for money in Kiteland.
a) If the Kiteland Central Bank has set the quantity of money so that the equilibrium interest rate is 4 percent, draw the supply of money curve.
b) Suppose that Kiteland's Central Bank wants to raise the interest rate by 1 percentage point. By how much must it change the quantity of real money?
c) In order to change the quantity of money to raise the interest rate by one percentage point, if the Central Bank uses an open market operation, does it make an open market purchase or an open market sale? Explain your answer.

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Definitions:

Conduct

The manner in which a person behaves, especially in a particular place or situation.

Participative Management

An effort to involve employees in a company’s decision-making.

Decision Making

The process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.

Authoritarian

A governing or leadership style characterized by absolute or blind obedience to authority, as opposed to individual freedom and related to centralization of power.