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Effects of the following two shocks

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Reference no: EM132550631

Use the IS-LM model to analyze in detail the effects of the following two shocks -

1. a housing market crash that reduces consumers' wealth

2. consumers' using cash in transactions more frequently in response to an increase in identity theft

For each shock,

a. Use the Keynesian Cross and Theory of Liquidity preference to explain the shifts in IS and LM curve

b. Use the IS-LM diagram to determine the effects on Y and r.

c. Figure out what happens to C, I, and the unemployment rate.

Your explanations must include graphs with appropriate labels for axes and curves.

Reference no: EM132550631

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