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Q. 2. Derive LM Curve and show the impacts on it of the followings. (Note: draw diagram for each (5 marks) part and explain each
Q. 2. Derive LM Curve and show the impacts on it of the followings. (Note: draw diagram for each (5 marks) part and explain each effect with a proper channel) a. Decrease in the expected future marginal productivity of capital b. Interest on money falls c. Nominal money supply falls, keeping the price level constant d. Liquidity of nonmonetary assets decreases e. Current output falls
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