Fiscal policy to fight against recession-rising unemployment

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Reference no: EM13700179

Suppose that U.S. government actively uses the fiscal policy to fight against recession and rising unemployment. To incorporate this behavior of government into the model, let’s assume that the government spending equation is given by where 0.

Assume the reminder of the model is unchanged from the original setup.

a) Explain why the above equation could represent the active fiscal policy to fight against recession.

Reference no: EM13700179

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