In the liquidity preference framework, demonstrate graphically the effect of a decrease in the money supply. Indicate on the graph the excess demand or excess supply of money. Explain the process of adjustment that results in a change in the equilibrium interest rate, and the direction of the change in rates.

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The Answer of In the liquidity preference framework, demonstrate graphically the effect of a decrease in the money supply. Indicate on the graph the excess demand or excess supply of money. Explain the process of adjustment that results in a change in the equilibrium interest rate, and the direction of the change in rates.

In the Liquidity Preference Framework, Demonstrate Graphically the Effect of a Decrease