When loans are repaid at commercial banks:

Using the ISLM model, show graphically and explain the effects of a monetary contraction. What is the effect on the equilibrium interest rate and level of output?

What will be an ideal response?

When positive externalities exist, the private market equilibrium represents a

A) market price which is too low and a market quantity which is too low. B) market price which is too low and a market quantity which is too high. C) market price which is too high and a market quantity which is too low. D) market price which is too high and a market quantity which is too high.