Question: The Aggregate Expenditures Model ( Multiplier Model ) assumes that the price index, interest rate, and exchange rate remain constant when a ceteris paribus increase

The Aggregate Expenditures Model

(

Multiplier Model

)

assumes that the price index, interest rate, and exchange rate remain constant when a ceteris paribus increase in spending occurs. If we allow the price index to increase when a ceteris paribus increase in spending occurs, then

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