Qu.6 MMT, Money and Financial Markets 60 marks Suppose a government can convince or ordered its central bank to monetise its budget deficits as advocated by Modern Monetary Theory. a. Explain using diagrams the effects of financing budget deficits in this manner on i. the bond market and bond prices, ii. the money market and nominal interest rate, and iii. how the two are related. (15 marks) b. Explain with AD-AS diagrams (either three-zone or Hubbard et. al.) the short-run effect on real GDP growth and inflation from i. the effect of the fiscal stimulus from the government deficit ii. the additional effect from monetising the deficit. (15 marks) c. Explain with AD-AS diagrams the difference between New-Keynesian and New-Classicalist views of the long-run effects on real GDP growth and inflation from monetising the deficit (30