Liquidity Trap and Insensitive Investment Function
The Keynesian Transmission mechanism will eliminate a recessionary gap if there are not Liquidity Trap or Insensitive Investment function. Explain:
a) What it is a liquidity trap
b) What it is insensitive investment function
Aggregate Demand
Considering the formula for Aggregate Demand (Also known as the product market) answer the following question:
Name two macroeconomic variables that decline when the economy goes into recession, and explain why this happens?
Name one macroeconomic variable that rises during a recession, and explain why this happens?
Demand and Supply
Popeye's income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to Popeye's demand curve for spinach?