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An economy begins in long-run equilibrium, and then a change in government regulations makes holding money...

  1. An economy begins in long-run equilibrium, and then a change in government regulations makes holding money less attractive.
    1. How does this change affect the demand for money?
    2. What happens to the velocity of money?
    3. If the Fed keeps the money supply constant, what will happen to output and prices in the short run and in the long run?
    4. If the goal of the Fed is to stabilize the price level, should the Fed keep the money supply constant in response to this regulatory change? If not, what should it do? Why?
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