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1 . In the real business cycle model, suppose government spending increases temporarily. Use diagrams and explain your results. a. Determine the equilibrium effects on

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1 . In the real business cycle model, suppose government spending increases temporarily. Use diagrams and explain your results. a. Determine the equilibrium effects on real output, consumption, investment, the price level, employment and the real wage using graphical analysis. (5 marks) b. Could business cycles be explained by uctuations in G? That is, does the model replicate the key business cycle facts When subject to temporary government spending shocks

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