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Consider the New-Keynesian model with partial sticky price studied A) Due to the intensification of the pandemic with deadly Delta variant, the zero lower bound
Consider the New-Keynesian model with partial sticky price studied
A) Due to the intensification of the pandemic with deadly Delta variant, the zero lower bound is binding. Draw the IS-LM and AS-AD diagram to illustrate this economic event.)
B) In part (a), the Australian economy was at the ZLB. Why is this an issue? Propose one policy so that the economy can escape the ZLB and discuss its transmission mechanism
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