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: EM131385485

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