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    IS-LM analysis/curves

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    Why does the government spend money surveying consumers and firms on their current level of confidence in the economy?

    How might the Federal Reserve react to a sudden drop in consumer confidence? Use IS-LM analysis (DRAW IT) and explain it to support your answer.

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    The IS curve represents the product market equilibrium condition.

    y=c(y-t(y))+I(r )+g

    and the LM curve represents the money market equilibrium condition

    M/P0=l(r) +k(y)

    Current level of consumer confidence & firms confidence have a great impact on the IS curve that is in the product market equilibrium. If there is a fall in the level of ...

    Solution Summary

    This job highlights government spending.