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Algebra or Diagram An economy with a xed price (P) and wage (W) is experiencing excess supply in both the goods and the labour market.

Algebra or Diagram

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An economy with a xed price (P) and wage (W) is experiencing excess supply in both the goods and the labour market. Output ( i7 ) and employment (KT ) are given by: _ '9 17:5; +E+nT +0 P P P K! = F" {17) where J? is the initial money endowment, T is taxation and G is government spending. Perceived prots, e, are treated as exogenous. Using either a diagram or algebra, explain what effect an expansionary monetary policy (an increase in it? ) will have on this economy

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