The diagram shows the determination of the rate of interest in an economy where MS represents the money supply and LP represents liquidity preference.
The rate of interest rises as a result of a shift in the liquidity preference curve from $L{P_1}$ to $L{P_2}$.
Which policy might be used to try to maintain the rate at ${r_1}$?
the purchase of bonds in the open market
2 )
reductions in income tax rates
3 )
increases in indirect taxes
4 )
increased government expenditure
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