Present the analysis of the statement that the effects of government deficits on aggregate demand depend on
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Present the analysis of the statement that the effects of government deficits on aggregate demand depend on the way in which the deficit is financed.
Also, analyze the above statement for the following cases:
(i) the central bank is known to follow the rule of stabilizing the growth of the money supply;
(ii) government debt (bonds) is only sold to the central bank;
(iii) the central bank is known to follow the rule of stabilizing the nominal rate of interest.
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