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Just days after Germany reported the highest inflation in generations (with February headline CPI soaring at a 7.6% annual pace and blowing away expectations), Germany

Just days after Germany reported the highest inflation in generations (with February headline CPI soaring at a 7.6% annual pace and blowing away expectations), Germany will be taking a step toward a return of the dreaded Weimar hyperinflation. According to the German Retail Federation (HDE), consumers should prepare for another wave of price hikes for everyday goods and groceries, with Reuters reporting that prices at German retail chains will explode between 20 and 50% starting on Monday, April 4. "The second wave of price increases is coming, and it will certainly be in double figures," Sanktiohanser warned. Since the start of the Ukraine war, there have been jumps in purchase prices that we have not experienced before. According to the president of the farming association, the food supply in Germany is assured for at least another year - though, after this, the forecasts are less certain. (Total 20' ) (1) Please describe the liquidity preference theory. (4' ) (2) According to the text, use the liquidity preference theory and loanable fund market theory to analyze what may change in the loanable funds market in Germany and why. (6' ) (3) Meanwhile, due to the Covia-19 pandemic, Germany plans to run regular budget deficits in the years ahead to finance increased military, energy, infrastructure and welfare spending in an ongoing shift from "black zero' policies begun in 2014 by increasing borrowing this year to a minimum of EUR 199.7bn (5% of GDP). How will this affect the domestic investment in Germany? Show your reasons. (10

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