Question: A. Explain how inflation expectations affect interest rates. [7 Marks] B. How does a reduction in fiscal dficits affect interest rates? [7 Marks] c. Can

A. Explain how inflation expectations affect interest rates. [7 Marks] B.

A. Explain how inflation expectations affect interest rates. [7 Marks] B. How does a reduction in fiscal dficits affect interest rates? [7 Marks] c. Can a person with rational expectations expect the price of IBM to increase by 10 [6 Marks] %? [TOTAL: 20 MARKS]

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