Asset DemandBond MarketEquilibrium Interest RatesMarket for Money: LPFEquilibrium Interest Rates in LPFEverything Else Remaining Equal?Liquidity preference framework says an increase in the moneysupply lowers interest rates: theliquidity effect.However, there aresecond round effects:1.Money supply up→economic activity expands→higherincome shifts money demand to the right (
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