macroeconomics

An economy is hit by a negative sectoral shock which results in a decline in the aggregate output and employment One policy suggestion is that the government should increase its expenditures so that aggregate output and employment can rise again. Using diagrams examine the effect of a temporary rise in government expenditures combined with a negative sectoral shock on a. Output, employment and consumption b. Investment, real interest rate and real wage Hint: You can analyze the temporary increase in government expenditures and the negative sectoral shocks separately then comment on the possible combined effects on the variables of interest