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Rise in government spending increase employment

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Reference no: EM1335800

Government expenditure

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

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

 

Reference no: EM1335800

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