4. Suppose there is a financial crisis and financial markets crash. How would this increase in risks of financial assets affect money demand or money supply and interest rate in 5010 H the liquidity preference model? Show the effect on the following graph. Make sure to include effect on interest rate. Interest rate Ms Md Quantity of money balances. IM B

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Chapter1: Making Economics Decisions
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ST8
allaogeb emil anoifanimonoblsm²
4. Suppose there is a financial crisis and financial markets crash. How would this increase
in risks of financial assets affect money demand or money supply and interest rate in
the liquidity preference model? Show the effect on the following graph.
Make sure to include effect on interest rate.
Interest rate
M³
Md
SM d
Quantity of money balances
lizaged to atspitiba yud bna thuoco apnivas oy moil 00012 notast uoy esoqque S
CSM bno IM no fpetto ofsibemmi lenovo brit ei todW.00012 to rhow, Ans suri riw
(word bna gnignierto el rloss to atrenogmoo doirlw worl2)
IM
SM
Transcribed Image Text:ST8 allaogeb emil anoifanimonoblsm² 4. Suppose there is a financial crisis and financial markets crash. How would this increase in risks of financial assets affect money demand or money supply and interest rate in the liquidity preference model? Show the effect on the following graph. Make sure to include effect on interest rate. Interest rate M³ Md SM d Quantity of money balances lizaged to atspitiba yud bna thuoco apnivas oy moil 00012 notast uoy esoqque S CSM bno IM no fpetto ofsibemmi lenovo brit ei todW.00012 to rhow, Ans suri riw (word bna gnignierto el rloss to atrenogmoo doirlw worl2) IM SM
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