Macroeconomics Theories and Policies

Business

Quiz 7 :
Keynesian System II

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Quiz 7 :
Keynesian System II

A liquidity trap is the assumption that one is on the horizontal portion of the demand for money curve where the demand for money is assumed to be perfectly interest elastic.

Below the IS curve,for a given interest rate income is lower than equilibrium income.As a result,unplanned inventories would be positive.

An increase in government spending,a decrease in taxes,an increase in investment,a decrease in consumption or an increase in savings.