Problem
Suppose in the New Keynesian open-economy model, that there is a positive output gap. There is also a liquidity trap at the world level, in that r∗ = 0. Is there anything that economic policy can do to close the output gap? If so, what? Explain.
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.