What if, at a low level of interest rates, the money dem
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What if, at a low level of interest rates, the money demand curve became nearly horizontal, as in the following graph. T
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What if, at a low level of interest rates, the money demand curve became nearly horizontal, as in the following graph. That is, with interest rates so low, the public would not find it attractive to hold bonds; thus, money demand would be very high. Many argue that this was the position of the U.S. economy in 2003. If the Fed decided to expand the money supply in the graph, what would be the impact on interest rates?
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