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{"ops":[{"insert":"Consider the Economy of Rwanda. The consumption function is given by \ud835\udc36 = 200 + 0.75[\ud835\udc4c \u2212 \ud835\udc47] while the investment function is \ud835\udc3c = 200 \u2212 25\ud835\udc5f. Government purchases and taxes are both 100.\nThe money demand function of Rwanda is [\ud835\udc40 \ud835\udc43\u2044 ] \ud835\udc51 = \ud835\udc4c \u2212 100\ud835\udc5f. The nominal money supply is 100 and the price level P is 2. [13 Marks]\ni) Derive the IS curve equation.\nii) Draw a well labeled diagram of the IS Curve.\niii) Derive the LM curve equation.\niv) Draw a well labeled diagram of the LM Curve.\nv) Determine the equilibrium level of income and equilibrium interest rate\n2. Using an appropriate hypothetical example, describe how commercial banks \u201ccreates and multiplies money\u201d in an economy [4 Marks]\n3. Using appropriate Phillip's curve diagrams, describe the \"short-run\" and \"long-run\" relationships between inflation and unemployment. [3\n"}]}
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