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Graph the aggregate demand curve as it depends on changes in the level of income. Assume that the investment spending is endogenous and a function
Graph the aggregate demand curve as it depends on changes in the level of income. Assume that the investment spending is endogenous and a function of changes in nominal interest rates. Use your graph to show what happens if we have an increase in the nominal rate of interest from ! to ". Use this graph to drive the IS curve in a new diagram and relate the two diagrams to each other to get full credit
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