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Question - The government of Imaginia feels that the economy is in a slump, with rising unemployment - it aims to boost the economy to full employment level but realizes output has to increase by $1 billion to do so.
A) The value of expenditure multiplier is 5, what amount does it have to spend to reach its goal? Would this amount guarantee such increase in output in all situations?
B) Draw a money market and an AD/AS diagram to show how, through printing money, the government can temporarily achieve the same objective.
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