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Chapter 11 The Effect of a Monetary Injection

Chapter 11 The Effect of a Monetary Injection - V al ue of...

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Value of Money, 1/ P Money supply Price Level, P 1 (Low) 1.33 2 4 (High) Quantity of Money Quantity fixed by the Bank of Canada Money dem and (Low) 0 (High) 1 3/ 4 1/ 2 1/ 4 Equilibrium value of m oney Equilibr price le A B The Effects of a Monetary Injection
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The Effects of a Monetary Injection o The money market begins in equilibrium o There is a monetary injection that creates an excess supply of money and  immediately the money supply curve shifts right o Now people have more money in their wallets than they want o They may buy goods and services with their excess supply of money or make  deposits in the bank which will loan out excess money
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