Draw an IS-LM model in general equilibrium. Show the effect of expan-sionary monetary policy, and then explain and show what adjustment will happen in the long run. Explain the trade-off for this policy in the Keynesianversion and the counterargument from the classical version.

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter27: Issues In Macroeconomic Theory And Policy
Section: Chapter Questions
Problem 13P
Question

Draw an IS-LM model in general equilibrium. Show the effect of expan-
sionary monetary policy, and then explain and show what adjustment will

happen in the long run. Explain the trade-off for this policy in the Keynesian
version and the counterargument from the classical version.

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