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rses / ECON 102/1-2020/SPRODAT! Suppose that the central bank were to choose an interest rate that it thinks will result in a
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Answer #1

Putting real interest function which is function of inflation, in IS curve will replace r and put inflation as a variable.

So IS curve will show income or total spending function of inflation.

Option D is right.

Note: putting one function into another one just gives a new relation or function ,it doesn't change the existing relationship.

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