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2 simply econ problem Explain the relation ship between interest rate and quantity demanded of Money...

2 simply econ problem

Explain the relation ship between interest rate and quantity demanded of Money in Money(Credit) market.

Discuss the possible limitation of easy Monetary policy under Liquidity Trap in Keynesian Transmission Mechanism

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Answer #1

The quantity demanded for money is inversely related to the interest rate. If interest rate is high people will buy more of bonds and demand less of money and when interest rate are low people will buy less of bonds and demand more of money as investing in bonds are not profitable.

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