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What does the slope of the yield curve tell us? Suppose that economy is in recession...

What does the slope of the yield curve tell us? Suppose that economy is in recession and monetary authority decreases policy rate (interest rate) to return output to its potential level. Illustrate using relevant graphs when the yield curve is i) approximately horizontal ii) downward sloping (Hint: Use expectations augmented IS-LM model).

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Rahul Sunny answered 3 months ago
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