[3) The derivation of the LM curve assumes that MS is exogenous. But suppose instead that the Central Bank has some target interest rate 1" and that it adjusts M5 to keep 1" always equal to F. (a) With this policy, 1what is the slope of the LM curve? {b} With this policy, What is the slope of AD curve? [4) During the early 1980s, the Korean economy saw the largest and quickest reduction in ination recent history. By the late 1970s, ination had reached the doubledigit range. Monetary policy in the early 1980s aimed to reduce the rate of ination. This announcement began a period of tight money that, by 19%* brought the ination rate down to about 3 percent. (i) Explain how the monetary tightening affects r"nominal\" interest rate in the short run using the liquidity preference theory (or IS LM model). (ii) Explain how the monetary tightening affects \"nominal" interest rate in the long run using the Quantity Theory of Money and the Fisher Effect