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The current COVID-19 wave of new cases has caused the residents of a given economy to reduce their consumption. Using the IS-LM and AS-AD models,
The current COVID-19 wave of new cases has caused the residents of a given economy to reduce their consumption. Using the IS-LM and AS-AD models, explain what the fiscal authority can do to help stabilize output. Assuming that prices are perfectly sticky in the short-run, can you explain the implications of the policies in the short-run and in the long run. How will this also look like on a graph?
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