1. Explain the meaning of the zero-lower bound. What happens to the LM curve and output if the central bank decides to increase the money supply when the economy is at the zero-lower bound?
2. Assume that the economy is at the zero-lower bound. What is the slope of the AD curve? Explain your answers using a graph.
3. What action can the government or the central bank take to bring the economy closer to the natural level of output when the economy is at the zero-lower bound? Show the effect of this using the IS-LM model and the AS-AD model.