Illustrate the following graphically: (a) Fiscal policy destabilizes the economy. (b) Fiscal policy eliminates an inflationary gap.
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(a) Fiscal policy destabilizes the economy.
(b) Fiscal policy eliminates an inflationary gap.
(c) Fiscal policy only partly eliminates a recessionary gap.
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a The economy is at Q 1 in a recessionary gap and government increases AD too muc...View the full answer
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