Fluctuations in government expenditur

Reference no: EM1373749

Based on the newspaper government spending in the US is expected to rise through $30 billion next year. One of the senators of your state is touting how this increase in spending will lead to an rise in employment and aggregate output. The economy is currently in long-run equilibrium at the natural rate of output.

a: Will the increase in government spending increase employment and aggregate output in the short-run? Why? Demonstrate graphically and use the GDP equation to support your answer.

Reference no: EM1373749

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