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Q. Using a figure, show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.
Answer: A temporarily monetary expansion will move the economy from DD1 to DD2 and output increases. A permanent financial expansion will as well shift the AA curve to the left and down. The small exchange rate appreciates that is E decreases.
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THE SETTING Country X is blessed with large reserves of natural resources, spectacular physical landscape and a moderate climate. It is inhabited by a well educated and industrious
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What can explain the failure of relative PPP to hold in reality? Answer: Government procedures of the price level differ from country to country. One cause for these differe
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