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In the coordination failure model, suppose the government announces a decrease in future G . 1. Using the graphs, determine the effects of this change

In the coordination failure model, suppose the government announces a decrease in future G .

1. Using the graphs, determine the effects of this change on the aggregate output and the real interest in the good equilibrium and in the bad equilibrium, and explain your results. ([08 pts])

2. Is the investment less or more volatile with this policy? ([02 pts])

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