Essay on Old and new risks and the challenges for policymakers Tasks, rationale and how to tackle each task and plan the essay 1}As a result of profound structural changes, the global economy before the pandemic was a world of saving glut and liquidity traps. Explain analytically and illustrate why and how these changes increased the risk of economies hitting the zero lower bound (ZLBl and how Central Banks have reacted to these risks by resorting to unconventional policy tools. In your analysis, use empirical evidence and historical examples of these tools. (40 marks} This task aims to assess your understanding of the factors that have increased the risk of hitting the ZLB. We discussed them during week 3 [application exercises}. You can start by defining the saving glut [see the article of The Economist]. Then it would help if you used equations and graphs (IS.MP.U|P and kin ked MP, use an upward sloping AS in your graph} to show why the factors you identified can increase the chance of falling into the Liquidity Trap. Careful to explain and justify which curve [or part of the curve) will shift and how it will shift' refer back to equations (a shift of a curve means that something in the equation has also changed and shifting curves without proper analyticaljustification will g allow getting full marks]. Describe the zerolower bound. What is it? Why do we reach it? What happens when we reach it? In which way are (335 challenged? What sort of policies could a CB use under ZLB? Bring examples of CBS that have used these policies