Suppose that the economy can be described by a closed-economy IS-LM framework and that is in a recession. Assume that the IS curve is relatively steep while the LM curve is relatively flat. If you were to advise the policymakers on which action to take, what would be your advice? Show graphically.

Suppose that the economy can be described by a closed-economy IS-LM framework and that is in a recession. Assume that the IS curve is relatively steep while the LM curve is relatively flat. If you were to advise the policymakers on which action to take, what would be your advice? Show graphically.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 16P

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Question

Suppose that the economy can be described by a closed-economy IS-LM framework and that is
in a recession. Assume that the IS curve is relatively steep while the LM curve is relatively flat. If
you were to advise the policymakers on which action to take, what would be your advice? Show
graphically.

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