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isi macro

Seecha
88 posts
Keynes argued that monetary policy was ineffective during the Great Depression because
(a) IS curve was vertical and stuck at a low level of income.
(b) Both the IS and the LM curves were vertical.
(c) IS curve was continuously shifting, while the LM curve was vertical.
(d) None of the above choices is correct.
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Re: isi macro

sneha
35 posts
A should be the answer.Since IS curve is vertical,shifts in LM curve will not affect output but only lower down the interest rate.

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Re: isi macro

sneha
35 posts
I'm not sure though.Can anybody confirm this? Am I right?
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Re: isi macro

Seecha
88 posts
it has been written inthe dornbusch that  accrd to keynesian IS curve was very steep due to invstmnt dmnd being very unresponsive to the intrest rate . and at the same time LM was quite flat .....
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otherwise i was also going with option a
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Re: isi macro

sneha
35 posts
 that is liquidity trap situation

 Thnx Seecha