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Question 1 Discuss, by means of appropriate diagrams and explanation, the Keynesian liquidity trap. Depict both the LM curve and aggregate demand (AD) curve, and

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Question 1 Discuss, by means of appropriate diagrams and explanation, the Keynesian liquidity trap. Depict both the LM curve and aggregate demand (AD) curve, and explain their appearance, in the case of the liquidity trap. If you were to advise the policymakers on which action to take, what would be your advice? [50 marks]

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