How the governments fiscal policy could be used

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Question: Assume that the economy is in a short-run equilibrium in 2023, as you drew in part (ii), and that no movement to the long-run equilibrium has begun. Show on the AD-AS diagram, how the government's fiscal policy could be used to move the economy towards the potential output. In your answer, make sure you explain whether the government should increase or decrease government purchases and taxes.

Reference no: EM133710498

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