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1.Answer the following questions assuming known IS and LM curves. a)Derive the associated aggregate demand ( AD ) curve. (5 marks) b)Why does it have

1.Answer the following questions assuming known IS and LM curves.

a)Derive the associated aggregate demand (AD) curve. (5 marks)

b)Why does it have a negative slope? (5 marks)

c)What is the effect of an increase in taxes on the AD curve? (5 marks)

d)What is the effect of a decrease in real money balances on the AD curve?

(5 marks)

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