Problem
1. What happens when the money supply increases in a liquidity trap?
2. In the New Keynesian model, does a liquidity trap imply that no economic policy can close a positive output gap?
3. What are the faults of the New Keynesian model?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.