An economy is initially i

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An economy is initially in long-run equilibrium. The introduction of an electronicpayments system dramatically reduces the demand for money in the economy.a. What is the short-run impact on prices and output of the new system?b. What can the central bank do, if anything, to counteract the short-runchanges in output and prices?c. If the central bank does not take any policy actions, what will be thelong-run impact of the electronic payments system on prices andoutput?

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