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is-lm model open macro Q4) What does the slope of the yield curve tell us? Suppose that economy is in recession and monetary authority decreases

is-lm model open macro

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Q4) What does the slope of the yield curve tell us? Suppose that economy is in recession and monetary authority decreases policy rate (interest rate] to return output to its potential level. Illustrate using relevant graphs when the yield curve is i) approximately horizontal ii) downward sloping (Hint: Use expectations augmented IS-LM model). (25 pts.)

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