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How effective is this policy

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Reference no: EM131499472

Let's assume the country suffers from a liquidity trap (people prefer to hold cash than any other asset). Then the central bank of this economy decides to expand money supply.

How effective is this policy? Explain and use the IS-LM functions. What about expansionary fiscal policy? Will it be effective in achieving its goal? Explain and use graphs.

Reference no: EM131499472

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