• Focusing upon the Australian economy, use the IS-LM model address the following:
  • i) First, using the IS-LM model, illustrate and discuss the impact of the GFC on interest rates and economic activity. Remember to explain any changes you have made to the curves and/or any shift(s) you have undertaken. what curve shifted and which way did it shift? did IS become steeper or flatter, did LM become steeper or flatter? explain why!
  • ii) Second, as a consequence of what you have shown in step i) use the IS-LM framework to illustrate and discuss the impact of policy responses from both the government and central bank to the GFC and what this means for interest rates and economic activity. Remember to explain any changes you have made to the curves and/or any shift(s) you have undertaken. what curve did this shift? did it shift left or right? how effective was each policy, given the steepness or flatness of the IS and LM curves?
• please obviously answer in full detail with accompanying diagrams