Assume economy is suffering a liquidity trap
Question # 00621190
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Updated on: 11/23/2017 01:04 PM Due on: 11/23/2017
Using well-labelled graphs for the IS-LM, PS-WS and AS-AD models, show the adjustments
toward both the short run and medium run equilibrium under the following situations:
a) Assume economy is suffering a liquidity trap, and the European migrant crisis has made
consumers pessimistic about the future. Explain whether fiscal policy and conventional monetary
policy can be useful to solve the problem.(13 marks)
b) The government introduces a new paid-paternal leave scheme. (7 marks)
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Rating:
5/
Solution: Assume economy is suffering a liquidity trap