1. Blanchard’s development of the ISLM model adds a second financial market variable that he calls...

1. Blanchard’s development of the ISLM model adds a second financial market variable that he calls the risk premium. Explain carefully what this risk premium is and which component of expenditure is assumed to be affected by it? ( 10 marks)

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Rahul Sunny answered 8 months ago

1.Blanchard’s development of the ISLM model adds a second financial market variable that he calls the...

1.Blanchard’s development of the ISLM model adds a second financial market variable that he calls the risk premium. Explain carefully what this risk premium is and which component of expenditure is assumed to be affected by it. [8 marks]

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