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Explain how increasing government spending using bond markets (more spending than tax revenue, thus a need for government to borrow) potentially affects the real interest
Explain how increasing government spending using bond markets (more spending than tax revenue, thus a need for government to borrow) potentially affects the real interest rate (r), real GDP (y), inflation expectations ( ), the unemployment rate (URate), and the spot exchange rate for the US Dollar as foreign currency, (es), assuming the economy is not at full employment and has flexible exchange rates.
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