Question: Hello i need help about this, the info is fully given. Q) After prolonged recession, the financial market participants anticipated deflation would occur in the

Hello i need help about this, the info is fully given.

Q) After prolonged recession, the financial market participants anticipated deflation would occur in the future.

1)How would the anticipated deflation affect the interest rate? Illustrate this problem using a diagram of the loanable funds approach.

2)What effect would you expect this forecast to have on the slope of an inverse yield curve? Explain with the graph of the yield curve.

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