In the real business cycle model, suppose the government spending increases temporarily. Determine the effect on labour market, holding the interest rate constant Explain what impact this temporary increase in government spending has in the goods market, holding the interest rate constant? Illustrate with graphs. Suppose that the interest rate increases in response to this temporary increase in government spending. How will it affect the labour market and the goods market? Illustrate with graphs. Argue that the price level couid go up or down. Specify the conditions under which the price level goes up. Illustrate graphically. Determine whcther investment and average labor productivity increases or decreases 1. 2. 3. 4. 5.

In the real business cycle model, suppose the government spending increases temporarily. Determine the effect on labour market, holding the interest rate constant Explain what impact this temporary increase in government spending has in the goods market, holding the interest rate constant? Illustrate with graphs. Suppose that the interest rate increases in response to this temporary increase in government spending. How will it affect the labour market and the goods market? Illustrate with graphs. Argue that the price level couid go up or down. Specify the conditions under which the price level goes up. Illustrate graphically. Determine whcther investment and average labor productivity increases or decreases 1. 2. 3. 4. 5.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 32RQ: How is long-term growth illustrated in an AD/AS model?

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