The IS Curve represents the equilibrium in the goods market and the LM Curve represents the equilibrium in the money market. The following are the equations for the IS-LM curve: IS relation : Y = C(Y – T) + I(Y, r + x) + G LM relation : r = ?̅ Y=Output, C=Consumption, T=Tax, I=Investment, G=Government Expenditure; r=interest rate, x=risk premium. a. What is unconventional monetary policy? When the central bank should conduct this kind of monetary policy? Give an example of unconventional monetary policy. b. Draw the IS-LM movement of unconventional monetary policy and tell the story behind it.
The IS Curve represents the equilibrium in the goods market and the LM Curve represents the equilibrium in the money market. The following are the equations for the IS-LM curve: IS relation : Y = C(Y – T) + I(Y, r + x) + G LM relation : r = ?̅ Y=Output, C=Consumption, T=Tax, I=Investment, G=Government Expenditure; r=interest rate, x=risk premium. a. What is unconventional monetary policy? When the central bank should conduct this kind of monetary policy? Give an example of unconventional monetary policy. b. Draw the IS-LM movement of unconventional monetary policy and tell the story behind it.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The IS Curve represents the equilibrium in the goods market and the LM Curve represents the equilibrium in the
IS relation : Y = C(Y – T) + I(Y, r + x) + G
LM relation : r = ?̅
Y=Output, C=Consumption, T=Tax, I=Investment, G=Government Expenditure; r=interest rate, x=risk premium.
a. What is unconventional monetary policy? When the central bank should conduct this kind of monetary policy? Give an example of unconventional monetary policy.
b. Draw the IS-LM movement of unconventional monetary policy and tell the story behind it.
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