Bentley University Macro Economics Essay

Description

What role does the interest sensitivity of money demand and investment play in determining the proper choice of policy: fiscal or monetary. What is the best case for monetary policy what is the best case for fiscal policy
Briefly explain the liquidity trap
Briefly explain the classical case
Using and ISLM model explain how the economy will adjust to an increase in government spending (trace each step) NOTE: Consider the general case: both money demand and investment are interest sensitive but neither are at an extreme.
Using the ISLM model, have the Federal Reserve engaged in an expansionary open market operation. Trace the steps that the economy will take in order to reach its final equilibrium

In questions four and five you need to create a graph as well as explain the adjustment process***

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