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Suppose that the likelihood of a future military contract increases. This can be modelled as G unchanged, G 0 increases. Use the real intertemporal model

Suppose that the likelihood of a future military contract increases. This can be modelled as G unchanged, G 0 increases. Use the real intertemporal model (which includes the current labor supply, NS ; and demand curves, N D, and the output supply, Y s ; and output demand, Y; curves) to show graphically what happens to output, employment, real wages and the real interest rate. Also, infer what happens to investment and consumption.

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