During the Recession of 1990-1991,interest Rates in the U

question 3

Essay

During the recession of 1990-1991,interest rates in the U.S.dropped by nearly two percentage points while output rose and inflation fell.Can you explain this result in the Keynesian model? Show your explanation graphically using the IS-LM and AD-AS models.

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Definitions:

Embryos

Early stages of development in multicellular organisms following fertilization.

Skeletal System

The framework of bones and other connective tissues that provides support, shape, and protection to the human body.

Cranial Cavity

The space within the skull that encases and protects the brain.

Homo Sapiens

The species of bipedal primates to which modern humans belong, characterized by a brain capable of complex reasoning, language, and the creation of art.