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Suppose in the real business cycle model that there is a simultaneous temporary increase in both current government spending and in the current money supply.
Suppose in the real business cycle model that there is a simultaneous temporary increase in both current government spending and in the current money supply. Draw diagrams for the labour, goods and money market, and the production function. Determine the equilibrium effects of these two shocks occurring simultaneously on employment, output, consumption, investment, money, real wages, the real interest rate, and the price level. Provide a detailed economic analysis explaining your results with the aid of the diagrams.
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