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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 MS₂ and the Bank of Canada conducts contractionary monetary policy,in the short run the interest rate increases to i₁.In the long run,the demand for money will _____,and the interest rate will_____.

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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 MS₂ and the Bank of Canada conducts contractionary monetary policy,in the short run the interest rate increases to i₁.In the long run,the demand for money will _____,and the interest rate will_____.

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In the long run, the demand for money will decrease as a result of the contractionary monetary policy. This will lead to a decrease in the interest rate to its original level, i₂.

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