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Consider an economy with a money market in equilibrium, a real interest rate of 1% and an expected inflation rate of 2%. Concerns about a potential recession leads the public to revise their expected inflation rate to -3%. a) How will this change in expected inflation impact the demand for real money balances in this economy? Explain. b) Explain whether or not there is anything that can be done to prevent deflation from occurring in this economy. 1 B E O U S