What would happen with the aggregate expenditure model

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Reference no: EM132207446

Question: Assume that there is an economy with the level of unemployement (U) of 10% and an inflation rate (P) of 3%. The government in this economy tried to reduce the unemployement level to 6% by increasing its spending. Show and explain how this injection would affect the level of output (income) in the Aggregate Expenditure Model and it's effects on the trade off of in the simple Phillips Curve Model? And what would happen with the Aggregate Expenditure Model and the Phillips Curve model? And what would happen with the Aggregate Expenditure Model and the Phillips Curve if we assume, as correct, the arguments made by Monetarist economists in this economy who state that the natural rate of unemployement (U*) is 10%?

Reference no: EM132207446

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