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-(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate.If the money supply is at MS₁ and the Bank of Canada conducts expansionary monetary policy,in the short run the interest rate drops to i₂.In the long run,prices will _____,thereby ___________the demand for money.

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Use the following to answer questions:

-(Figure: Short-Run Determination of the Interest Rate) Refer to Figure: Short-Run Determination of the Interest Rate.If the money supply is at MS₁ and the Bank of Canada conducts expansionary monetary policy,in the short run the interest rate drops to i₂.In the long run,prices will _____,thereby ___________the demand for money.

Quizplus · Accepted Answer

In the long run, expansionary monetary policy leads to higher prices, which increases the demand for money.

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