Determine the effects of this on current aggregate output

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Suppose that there is an increased confidence of the economy, shared among the economic agents: the representative consumer becomes optimistic of the economic performance and therefore, is willing to consume more, given his/her own income. Moreover, the representative firm becomes more confident about the business environment and therefore, plans to increase the investment expenditure. Using closed-economy 2-period macroeconomic model, determine the effects of this on current aggregate output, current real interest rate, current employment, current real wage, current consumption, and current investment. Explain your results with diagrams.

Reference no: EM131169312

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