isi macro

[Seecha]

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.

[sneha]

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.

[sneha]

I'm not sure though.Can anybody confirm this? Am I right?

[Seecha]

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

[sneha]

 that is liquidity trap situation

 Thnx Seecha