Question: In the coordination failure model, suppose that there is a permanent increase in the government spending. 1. Determine how this will affect output and employment.

In the coordination failure model, suppose that there is a permanent increase in the government spending. 1. Determine how this will affect output and employment. Illustrate graphically by drawing both the labour market and the output market. [15 ptsl 2. Will real output become more or less volatile overtime? [5 ptsl

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