![Suppose a liquidity trap exists. Graphically illustrate and explain the effects of an increase in government spending using the IS-LM model. | Homework.Study.com Suppose a liquidity trap exists. Graphically illustrate and explain the effects of an increase in government spending using the IS-LM model. | Homework.Study.com](https://homework.study.com/cimages/multimages/16/liquidity_trap5055410495176929065.jpg)
Suppose a liquidity trap exists. Graphically illustrate and explain the effects of an increase in government spending using the IS-LM model. | Homework.Study.com
Hoisted from the Archives: How I Learned to Stop Neoclassicizing and Love the Liquidity Trap: Peccavi Nimis et Mea Maxima Culpa Department
![PDF] The macroeconomics of financial crises: How risk premiums, liquidity traps and perfect traps affect policy options | Semantic Scholar PDF] The macroeconomics of financial crises: How risk premiums, liquidity traps and perfect traps affect policy options | Semantic Scholar](https://d3i71xaburhd42.cloudfront.net/e765154575289bb6f2546f9220d27bd762ce3398/17-Figure7-1.png)
PDF] The macroeconomics of financial crises: How risk premiums, liquidity traps and perfect traps affect policy options | Semantic Scholar
![What happens to the LM curve during a liquidity trap, where interest rates are sufficiently negative to the point that they surpass the cost of holding cash? Would it cease to continue What happens to the LM curve during a liquidity trap, where interest rates are sufficiently negative to the point that they surpass the cost of holding cash? Would it cease to continue](https://homework.study.com/cimages/multimages/16/pic-26045855122514015543.jpg)
What happens to the LM curve during a liquidity trap, where interest rates are sufficiently negative to the point that they surpass the cost of holding cash? Would it cease to continue
![1. If the economy is currently in a liquidity trap, an increase in the money supply would shift the MS curve _ and interest rates would _. A. right; decrease B. right; 1. If the economy is currently in a liquidity trap, an increase in the money supply would shift the MS curve _ and interest rates would _. A. right; decrease B. right;](https://homework.study.com/cimages/multimages/16/liquidity_trap8509955525041274769.jpg)