Y is real domestic output; ii) E is exchange rate in domestic currency/foreign currency terms, iii) if a government maintains a balanced budget, this implies that total government expenditure G is financed from government taxes T. G > T implies there is a government budget deficit.

Assume that a country has a law that requires its government to maintain a balanced budget at all times. Does this law imply that the country's government can no longer use a temporary increase in government spending to increase aggregate output in the short-run?