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Consider an economy described in the diagram below and suppose the IS and the LM relations are: IS:Y = C(Y-Tax, Confidence) + I(Y, Confidence, i

Consider an economy described in the diagram below and suppose the IS and the LM relations are:

IS:Y = C(Y-Tax, Confidence) + I(Y, Confidence, i + Premium) + G

LM:M/P = Y L(i)

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