"Fiscal Policy Can Have a Permanent Effect on Real Growth

question 65

Essay

"Fiscal policy can have a permanent effect on real growth because of intertemporal substitution." Explain this statement with the aid of an AD-AS diagram.

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Definitions:

Less Developed

A term referring to countries with lower levels of industrialization, lower standard of living, and lower Human Development Index (HDI) scores.

Agricultural Output

The total amount of agricultural products produced within a specific period.

Industrial Output

The total value of the goods and services produced by a country's industrial sector.

Insufficient Capital

Insufficient Capital refers to a situation where an individual or entity lacks the necessary financial resources or funding to support its operations, investments, or growth plans.