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Two economies are fairly identical except that in economy A the demand for loans is extremely sensitive to interest rates, while in economy B the

Two economies are fairly identical except that in economy A the demand for loans is extremely sensitive to interest rates, while in economy B the number of loans demanded barely changes when interest rates change. a. Draw two separate Loan Demand-Loan Supply diagrams, one for economy A and one for economy B. b. Suppose that the risk premium falls by the same amount in both economies. Show in your graphs which economy will experience a bigger fall in interest rates.

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