Labor market equilibrium and goods market equilibrium

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In the real business cycle model, suppose that government spending increases temporarily (i.e., Gt increases but Gt+1 does not). Determine the equilibrium effects of this using the diagrams of labor market equilibrium and goods market equilibrium. Briefly explain why demand or supply curve shift in a certain direction. Could the comovement of macroeconomic variables be explained by fluctuations in Gt ? That is, does the model predict the procyclicality of consumption Ct , investment It, employment Lt, and real wage Wt?

Reference no: EM131379928

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