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Consider now two economies, A and B. In economy A consumers save a smaller fraction of each additional dollar they earn compared to consumers in
Consider now two economies, A and B. In economy A consumers save a smaller fraction of each additional dollar they earn compared to consumers in economy B. The two economies are otherwise identical. Using the same initial equilibrium in the goods market for the two economies, explain how the response of output to a given temporary increase in government spending differs in the two economies.
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