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Explain the effect of an increase in government spending on the on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the

  1. Explain the effect of an increase in government spending on the on the equilibrium

output and inflation in the AD-AS model.

  1. Carefully distinguish between the short-run and the long-run equilibrium.
  2. Would this increase in government spending affect the potential output? Why/Why not?

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