What, if anything, does expansionary fiscal policy do in the i-M space graph, cet. par.? Explain. Indicate the disequilibrium that is created at the initial interest rate and explain what will happen and why.There is a liquidity trap in the i-M space graph. Show what this means in the i-M graph and then explain what type of macro policy will not work.

The expansionary fiscal policy i.e. increase in public spending and reduction on taxes are the most…

Answered: What, if anything, does expansionary…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 15P

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What, if anything, does expansionary fiscal policy do in the i-M space graph, cet. par.? Explain. Indicate the disequilibrium that is created at the initial interest rate and explain what will happen and why.
There is a liquidity trap in the i-M space graph. Show what this means in the i-M graph and then explain what type of macro policy will not work.

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