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Suppose, as the finance minister of the economy, you decide to use strong enough fiscal expansion to bring the economy out of the recession. Use
Suppose, as the finance minister of the economy, you decide to use strong enough fiscal expansion to bring the economy out of the recession. Use the IS-LM-Yn and AD-SRAS-LRAS diagrams to show the effects of such a fiscal expansion. What types of crowding out effects you might encounter, and how will these affect your choice on the size of the fiscal expansion?
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