ECON 200 During the recession, the federal government implemented

| June 14, 2018

During the recession, the federal government implemented a temporary expansion of government purchases in an e?ort to help stimulate the economy. Suppose that current taxes remained unchanged. Compare and contrast the e?ects of this change in our basic real intertemporal model (with Ricardian equivalence) and the Keynesian model (with e?ciency wages). In particular, what will be the e?ects on current output, employment, the real interest rate, and the real wage? How could you distinguish between the models?

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