Question: Using both IS / LM / FE and the AD / AS models, and the Keynesian assumptions, a . Suppose that the increased risk from

Using both IS/LM/FE and the AD/AS models, and the Keynesian assumptions,
a. Suppose that the increased risk from the previous question is occurring. Show graphically the expected changes in both the Short Run and the Long Run for the interest rate, GDP, and Prices.
b. On a separate graph, starting in the Short Run what policy would the Fed do to stabilize the economy. Show what would happen to the interest rate, GDP and Prices.
c. On a separate graph, starting in the Short Run what policies (3) would the Government do to stabilize the economy. Show what would happen to the interest rate, GDP and Prices.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!