3 questions on "Money and interest rates - the equilibrium interest rates"

What shows how the nominal quantity of money supplied by the bank of Canada varies with the interest rate?
The Money Supply Curve
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What is the shape of the money supply? And who choses it?
The shape of the money supply is vertical.
the Central banks chooses the money supply
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What happens to interest rates if the money demanded is less than the money supplied  (so to the left of the vertical line)? People holdings of money
  • At this point people want to hold less money than they want to save
  • quantity of money demanded is less than quantity of money supplied
  • quantity of interest bearing assets demanded is greater than quantity of interest bearing assets supplied
  • because quantity of interest bearing assets demanded is greater than quantity of interest bearing assets supplied those selling nonmonetary assets find can offer lower interest rates and still find buyers
  • so the interest rate decreases until the MD=MS
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