This appendix demonstrates why the ISLM model accurately represents movements in the real interest rate and the

Question:

This appendix demonstrates why the IS–LM model accurately represents movements in the real interest rate and the output gap during the Great Depression.
a. Use the IS–LM model to show the approximate movements of real interest rates and the output gap during the 2007–2009 financial crises.
b. Design a change in monetary policy that would have prevented the change in the output gap.