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Suppose that the government increases spending on National Defense. What are the implications of this increase in government spending on National Defense on the economy?
Suppose that the government increases spending on National Defense.
- What are the implications of this increase in government spending on National Defense on the economy? Use the AS-AD model to depict the impact of this event on the economy.
- How can the government use fiscal policy to return the economy to equilibrium? Describe all possible alternatives. For every alternative use a separate graph.
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