Money market

Assume that money market is initially in equilibrium and that the money supply is then increased.Explain the adjustments towards a new equilibrium interest rate. Will bond prices be higher or lower at the newequilibrium rate of interest? What effects would you expect the interest rate change to have on the levels ofoutput, employment and prices? What if the money supply is reduced? Why there is a need for the FederalReserve System to control the money supply?

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Money market

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