August 16, 2016

The basic idea consists in lowering the interest rates. According to textbook Keynesian economics, by lowering the interest rates, the Fed (who presumably controls the interest rates) will be able to stimulate aggregate demand, resulting in a higher level of output. However, the accumulated data points to a very tepid recovery in the developed world. This suggests a weak or small increase in the interest rate-induced increase in aggregate demand.

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