This report analyzes the effects of a fall in consumer confidence on the economy using an open economy IS/LM model for European countries. It explores how a decline in consumer confidence affects interest rates, consumption, investment, real exchange rates, and net exports. The report also discusses the appropriate monetary-fiscal policy mix to help the economy recover from recession and examines the effects of this policy mix on various economic indicators. Additionally, it highlights the concept of liquidity trap, which can make monetary policies ineffective in certain situations.