Question: . Assume that the economy is initially operating at full employment. Analyze the effect of a decrease in government purchases using the IS-LM model b.

. Assume that the economy is initially operating at full employment. Analyze the effect of a decrease in government purchases using the IS-LM model

b. What happens to real output and interest rate in the long-run (what is the new long-run equilibrium)? Explain and show graphically

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