Question: Use the IS-LM model to predict the short-run impact on the interest rate and output if the central bank pushes interest rates down at the

Use the IS-LM model to predict the short-run impact on the interest rate and output if the

central bank pushes interest rates down at the same time that both consumption and investment

fall due to a financial crisis. Illustrate your answer graphically. Be sure to label:

i. the axes

ii. the curves

iii. the initial equilibrium

iv. the direction the curves shift.

Explain your answer in words.

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