Question
Assume that the economy starts at the 'natural rate of output'. Now suppose there is a loss of investors' confidence, as a result, investment expenditure
Assume that the economy starts at the 'natural rate of output'. Now suppose there is a loss of investors' confidence, as a result, investment expenditure falls. Use the IS-LM and IS-MP diagrams to show the effects in the short run and the medium run. Show how expansionary fiscal policy may influence these equilibrium positions. (5 marks)
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Econometric Analysis
Authors: William H. Greene
7th edition
131395386, 131395381, 978-0131395381
