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In: Economics

12. a. Use the IS/LM model to illustrate an economy experiencing liquidity trap and operating below...

12. a. Use the IS/LM model to illustrate an economy experiencing liquidity trap and operating below the natural rate of output.

b. Explain and illustrate why expansionary monetary policy would not help to raise the output level to the natural rate.

c. Offer two alternative policies that would work to reduce unemployment under these circumstances. Explain and illustrate your answers.

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Expert Solution

Rahul Sunny answered 1 year ago
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