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Question from Past Macroeconomics Qualifying Exam (Spring, 2003 - Question one) at George Mason UniversityEdit

Different models of economic fluctuations predict that increases in government spending can affect output in different ways:

  • a. Select a model in which an increase in government spending leads to an increase in real output. Carefully explain the mechanism through which this happens.
  • b. Select a model in which an increase in government spending leads to a decline in real output. Again explain the mechanism through which this happens.
  • c. Select a model in which an increase in government spending leads to no change in real output. Explain why this occurs.
  • d. Which of these models has had the greatest empirical success. Explain.

AnswerEdit

  • (a)
  • (b)
  • (c)
  • (d)

Other QuestionsEdit

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