Use the Classical (RBC)IS-LM-FE Model to Show the Effects on the Economy

question 37

Essay

Use the classical (RBC)IS-LM-FE model to show the effects on the economy of a temporary decrease in government spending.You should show the impact on the real wage,employment output,the real interest rate,consumption,investment,and the price level.

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Definitions:

Price Control

Government-imposed limits on the prices that can be charged for goods and services, typically used to curb inflation or prevent shortages and surpluses.

Price Floor

A government or regulatory minimum price set above the equilibrium price, preventing market forces from reducing prices below that level, often applied to agricultural products.

Price Controls

Government-imposed limits on the prices charged for goods and services in a market, typically to curb inflation or protect consumers.

Deadweight Loss

A loss of economic efficiency that can occur when equilibrium for a good or a service is not achieved or is not achievable.