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3. Suppose the Liquidity Preference model of the term structure is correct and that we currently observe a normal (upward sloping) yield curve. For some
3. Suppose the Liquidity Preference model of the term structure is correct and that we currently observe a "normal" (upward sloping) yield curve. For some reason, everyone in the economy suddenly becomes much more risk averse, although expectations about the future course of short-term interest rates remain the same. State what effect this change in risk aversion will have on the shape of the yield curve, and explain why this occurs
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