What would happen when there is financial crisis

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Using the IS-MP and AD-IA model with an interest rate differential, show what would happen when there is a financial crisis that causes a decline in spending as well as a "credit crunch" (that is, an abrupt increase in the interest rate differential). Focus just on the immediate effects and not any long-term impacts or policy responses. Show both the IS-MP and AD-IA diagrams.

Reference no: EM133637593

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