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    Macroeconomics Study Set 34
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    Exam 9: The Crisis
  5. Question
    Suppose a Liquidity Trap Exists
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Suppose a Liquidity Trap Exists

Question 15

Question 15

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Suppose a liquidity trap exists.Graphically illustrate and explain the effects of an increase in government spending using the IS-LM model.

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Given that the liquidity trap already ex...

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