Question: Using the IS/MP model analyse how a lower bound on real interest rates might cause the economy to enter a deflationary spiral following a significant

Using the IS/MP model analyse how a lower bound on real interest rates might cause the economy to enter a deflationary spiral following a significant decrease in aggregate expenditure.

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Since economic agents are unlikely to want to deposit monies at negative interest rates the effective lower limit for nominal interest rates is zero T... View full answer

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