Macroeconomics Theories and Policies
Quiz 7 :
Keynesian System II
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Household consumption likely depends upon accumulated wealth and not just current income as it does in the basic Keynesian model examined in this chapter.How would the IS/LM model respond to a decline in housing prices,such as what occurred in the US during the 2008 global financial crisis,if consumption was a function of wealth.Provide a graph to illustrate.