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Describe the chain of events that are likely to unfold when the government increases spending. Explain your answer in terms of its impact on aggregate

  1. Describe the chain of events that are likely to unfold when the government increases spending. Explain your answer in terms of its impact on aggregate output, the demand for money, the interest rate and planned investment.
  2. Discuss how the consumption link provides another explanation for the downward-sloping aggregate demand curve.
  3. Explain the real wealth effect on aggregate demand. Summarize the real wealth effect with regard to an increase in the price level.

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