Suppose that the government initially has a balanced budget. Government spending then increases, without an accompanying increase
Question:
a. Use a graph to show the effects on real interest rates and investment. Use another graph to show the effects on capital stock, labor productivity, and potential GDP.
b. How would your answers in part (a) be different if the increase in government spending resulted in an increase in total factor productivity?
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Related Book For
Macroeconomics
ISBN: 9780132109994
1st Edition
Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty
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