(Answered) In late 2007 the us slipped into a serious recession due to

Management Studies

In late 2007, the US slipped into a serious recession, due to falling home prices(falling wealth), investor pessimism, and reduced exports. Reinforcing theseshocks were a large negative money shock (due to a sharp drop in the M1multiplier), and a credit crunch (impaired lending to firms, which negativelyaffected production).a. Use the IS-LM-FX diagrams to analyze the impacts of these negativeshocks. Indicate the impacts on the following variables: Y, i, E, C, I, TB (inthe absence of any government policies).

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