Problem
Suppose, in the sticky price model, that there is deficient financial liquidity, as we studied, and that there is a positive output gap. What will be the effect of a reduction in the central bank's target interest rate? Construct a diagram and explain your results. What would the appropriate monetary policy be?
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.