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Consider a fiscal contraction: G and/or T Use the IS/LM/FE model to derive the effects on the interest rate (r ); output (Y ), employment
Consider a fiscal contraction: G and/or T Use the IS/LM/FE model to derive the effects on the interest rate (r ); output (Y ), employment (N ) and unemployment (u); and the price level (P ). Make sure you distinguish between short-run and long-run effects. Comment on the value of the tax multiplier and government spending multiplier in the short run and in the long run
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