Question: What effects does an increase in government purchases have on the labour market, according to the classical theory? What effects does it have on output,
What effects does an increase in government purchases have on the labour market, according to the classical theory? What effects does it have on output, the real interest rate, and the price level? According to classical economists, should fiscal policy be used to smooth out the business cycle? Why, or why not?
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The increase in government purchases does not affect labour demand but causes an increase in la... View full answer
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