If Inflation Is Bad, Why Isn't Deflation Good? Use the IS-LM

question 78

Essay

If inflation is bad, why isn't deflation good? Use the IS-LM model to explain how deflation could result in a contraction in output.

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Definitions:

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without any prior learning.

Conditioned Stimulus

A previously neutral stimulus that, after being associated with an unconditioned stimulus, evokes a conditioned response.

Unconditioned Stimulus

An automatic and naturally occurring stimulus that elicits a response without the need for prior learning.

Conditioned Response

A conditioned response is a reaction to a formerly neutral stimulus that, through conditioning, has become linked to an unconditioned stimulus.