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Consider the previous increase in government purchases today. (a) What is the impact on the IS...

Consider the previous increase in government purchases today. (a) What is the impact on the IS curve assuming that there is a multiplier effect involved? Can you mention a reason why the multiplier can be high? (b) What is the impact on the IS curve assuming that the Ricardian equivalence holds? Explain why. (c) How are the intercept and the slope of the IS curve different in cases (b) and (c) above?

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Answer #1

PROTECT THE NATURE MOTION INS DO sue in gout purchare more money in mkt e demand im cous Income. Gout spending uicrase More m

Multiplier effect will rise on the basis of bank concept

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