Played in the build up to recent global financial crisis

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Reference no: EM131927834

a. Describe how the financial accelerator works when there is an increase in home prices? Draw a diagram showing the feedback mechanism.

b. Describe how the financial accelerator works when there is a decrease in home prices

c. How do financial constraints affect the financial accelerator? HINT: Relate financial constraints to the marginal propensity to consume

d. What is the role that higher LTV ratios played in the build up to the recent Global Financial Crisis?

Reference no: EM131927834

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