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Suppose that the central bank wants to slow down the economy by decreasing the money supply. The bankers estimate that the velocity of money is 2, and that the price level will decrease from 100 to 90 (deflation). Using the quantity equation of money, what will be the impact of an $80 million dollar decrease in the money supply on the quantity of goods and services in the economy, given an initial money supply of $800 million
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Suppose that the central bank wants to slow down the economy by decreasing the money supply. The ban...
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