What processes will take the economy to these levels

Reference no: EM13897635

Suppose that business pessimism reduces investment such that aggregate demand becomes less than full employment income at all non-negative rates of interest. Use IS-LM analysis to answer the following:

(a) Are there positive equilibrium levels of y, r and P in the neoclassical model?

(b) Are there positive equilibrium levels of y, r and P in the Keynesian ?xed-price model? In the Keynesian nominal wage model (without ?xed prices)?

What processes will take the economy to these levels?

Reference no: EM13897635

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