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Question One: If the income tax exemption on municipal bonds were abolished, what would happen to the interest rates on these bonds? What effect would

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Question One: If the income tax exemption on municipal bonds were abolished, what would happen to the interest rates on these bonds? What effect would the change have on interest rates on U.S. Treasury securities? Question Two: What is the effect of government budget surplus on the interest rate, explain carefully? Question Three: Use the liquidity preference framework to prove that interest rates are procyclical (rising when the economy is expanding and falling during recessions)

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