Question: 1.) Explain what effect a reduction in the future expected interest rate will have on the IS curve and LM curve in the current period.

1.) Explain what effect a reduction in the future expected interest rate will have on the IS curve and LM curve in the current period.

2.) Suppose that the interest rate this year is 6% and financial markets expect the interest rate to increase by 2% each year thereafter. Find the yield to maturity on (i) One-year bonds, (ii) Two-year bonds, and (iii) Three-year bonds.

Explain, if the real interest rate can ever be negative and what this implies about borrowing and lending.

PLEASE ANSWER ALL THESE 2 QUESTIONS ASAP!!

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