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1. Using the market for loanable fund diagram, show graphically and explain how the interest rate and investment are affected in each of the following cases. (Draw a separate diagram for each.)
i. A book titled 'Importance of Savings' convinces people to spend less.
ii. Government is running a budget surplus.
iii. Tax on interest income increases.
2.
i) Describe briefly the tools the central bank uses to control the money supply in the economy.
ii) Explain briefly why the central bank's control over the MS is not perfect.
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