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