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After the increase in total factor productivity the government decides to increase expenditures, G. Suppose the government increases G so that the representative consumer is
After the increase in total factor productivity the government decides to increase expenditures, G. Suppose the government increases G so that the representative consumer is just as well off (has the same level of utility) as before the change in total factor productivity. After the change in G and the increase in z, how does the level of consumption, employment, the real wage, and output compare to the levels before the increase in total factor productivity? Use diagrams as aids in your explanations.
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