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What would be the answer to these questions, diagram included would be preferable 1. Explain the effect of an increase in government spending on the

What would be the answer to these questions, diagram included would be preferable

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1. Explain the effect of an increase in government spending on the on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the short-run and the long-run equilibrium. Would this increase in government spending affect the potential output? Why/Why not? 2. What are anchored inflationary expectations and how do they reduce the cost of an adverse inflation shock? 3. Country A has 100 machines (physical capital) and a population of 100 (out which 80 are in the labour force). Discuss the effect on real GDP per capita if a. Population doubles (keeping machines constant at 100) b. Machines double (keeping the population constant at 100)

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