On Oct. 24, 1929 there was a widespread decline in stock prices, a phenomenon known as a stock market crash. This stock

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On Oct 24 1929 There Was A Widespread Decline In Stock Prices A Phenomenon Known As A Stock Market Crash This Stock 1 (1.52 MiB) Viewed 11 times

On Oct. 24, 1929 there was a widespread decline in stock prices, a phenomenon known as a stock market crash. This stock market crash is commonly viewed as the beginning of the recession known as the Great Depression. A) On a graph, use the traditional IS-LM model to analyze how the economy responds in the short-run and the long-run in response to a stock market crash (i.e. a sudden decline in household wealth). What happens in the short-run and the long-run to output, the real interest rate and the aggregate price level? (10pts) B) According to the traditional IS-LM model, how should have the Federal Reserve responded to this stock market crash? Explain your answer. (5pts) Upload your answers to Box