Question

Between january and december 1991, while the u.S. Economy was falling deeper into its recession, the interest rate on treasury bills fell from 6.3 percent to 4.1 percent. Use the is-lm model to explain this pattern of declining output and interest rates. Which curve must have shifted? Can you think of a reasonhistorically valid or simply imaginedthat this shift might have occurred?

Answer 1

sorry I don't know please someone else

Answer 2

• LEFTWARD SHIFT IN THE IS CURVE
  It can be seen that the Economy of the United States fall into a deeper recession and the situation got worse.
• The treasury bill went down like anything. From being 6.3 percent it went down to 4.1 percent. Inflation and many other similar factors can get adversely affect the situation.
• The supply and output declined and the interest rates also decreased.
• According to the ISLM curve, it can be said that there would have been a leftward shift in the IS curve As the output and interest goes down a further decrease.
• It can also be said that possible reasons for the decrease and shift might have been disproportionate with respect to the government spending or investments.

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