PROBLEM: The simple Keynesian model (SKM) implies that the government can boost GDP in the short-run by raising planned expenditure (E) on "G" since output (Y) must equal E = C+l+G Keynes recognised that additional E from any sources would increase the demand for money. Consequently, he had a separate money market to show how a fiscal expansion would increase the interest rate. A theoretical problem arises if we also allow the negative feedback from a higher interest rate (r) on private investment expenditure by setting I = 1 () such that if r increases, then I decreases. It concerns potential inconsistency between balancing E and Y in the SKM and ensuring the money market balance. Identify the theoretical problem precisely in your words. Explain how the Hicksian IS-LM model solves this theoretical PROBLEM. PROBLEM: The simple Keynesian model (SKM) implies that the government can boost GDP in the short-run by raising planned expenditure (E) on "G" since output (Y) must equal E = C+l+G Keynes recognised that additional E from any sources would increase the demand for money. Consequently, he had a separate money market to show how a fiscal expansion would increase the interest rate. A theoretical problem arises if we also allow the negative feedback from a higher interest rate (r) on private investment expenditure by setting I = 1 () such that if r increases, then I decreases. It concerns potential inconsistency between balancing E and Y in the SKM and ensuring the money market balance. Identify the theoretical problem precisely in your words. Explain how the Hicksian IS-LM model solves this theoretical