Suppose that business pessimism reduces investment such


Suppose that business pessimism reduces investment such that aggregate demand becomes less than full employment income at all non-negative rates of interest. Use IS-LM analysis to answer the following:

(a) Are there positive equilibrium levels of y, r and P in the neoclassical model?

(b) Are there positive equilibrium levels of y, r and P in the Keynesian ?xed-price model? In the Keynesian nominal wage model (without ?xed prices)?

What processes will take the economy to these levels?

Request for Solution File

Ask an Expert for Answer!!
Microeconomics: Suppose that business pessimism reduces investment such
Reference No:- TGS01190827

Expected delivery within 24 Hours