Return to the case considered in question 2. Where investment is completely interest inelastic and the IS
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Return to the case considered in question 2. Where investment is completely interest inelastic and the IS schedule is vertical. Analyze the effects of an increase in government spending in this case within the variable price-fixed wage version of the Keynesian model. Compare the effects with those in the fixed price version of the model.
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In the fixed price Keynesian model an increase in government spending will shift the vert...View the full answer
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