Question

1. Consumers’ using cash in transactions more frequently in response to an increase in identity theft

For each shock,

1. Use the Keynesian Cross and Theory of Liquidity preference to explain the shifts in IS and LM curve
2. Use the IS-LM diagram to determine the effects on Y and r.
3. Figure out what happens to C, I, and the unemployment rate.

Your explanations must include graphs with appropriate labels for axes and curves.

Answer 1