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Q4:(24 marks)

By December 6, 2021No Comments

Q4:(24 marks)a)We learned in this course that money is neutral in the long run.What does this theory ofmonetary neutrality mean?Does it mean that monetary policy is of no use?Explain.(12marks)b)Draw two diagrams of the money market to illustrate the effect of the expansionary monetarypolicy:one diagram for the effect on real interest rate,and the other one for the aggregatedemand curve.(12 marks)*****************************************************************************Q5:(For practice only!Consider the economy of a small country called Newland.It wasobserved that the total consumption spending was $6,500 in a year when their GDP was$10,000,and the total consumption spending was S7,300 in the following year when their



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