Consumption and investment fall due to a financial crisis

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Use the IS-LM model to predict the short-run impact on the interest rate and output if the central bank pushes interest rate down at the same time that both consumption and investment fall due to a financial crisis. Illustrate your answer graphically. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium; iv. the direction the curves shift. Explain your answer in words.

Reference no: EM13817883

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