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Liquidity trap and insensitive investment function

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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?

Reference no: EM131298608

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