Question
The 3-equation model Use the 3-equation model diagrams to show how the economy can fall into a deflation trap. Explain, with reference to the diagram,
The 3-equation model
Use the 3-equation model diagrams to show how the economy can fall into a deflation trap. Explain, with reference to the diagram, how the central bank/government can intervene to escape the trap. Show the relevant IS curve and re-label the MR as the PR to indicate that fiscal policy is being used. Are there any reasons why these policies might not work?
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Microeconomics
Authors: David Besanko, Ronald Braeutigam
5th edition
1118572270, 978-1118799062, 1118799062, 978-1118572276
