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a. Assume that the economy is in equilibrium when the real interest rate rises. Explain, step-by-step, without the aid of diagram, how the components of expenditure adjust to bring the economy to its new equilibrium. b. The IS model implies that a dollar of government spending has a larger impact on equilibrium output than does a dollar of taxes. Is it True or False? Explain in detail.
(a)\r\n\r\nThe components of expenditure adjust to bring the economy to its new equilibrium by using certain steps like saving etc\r\n\r\n(b)\r\n\r\nI.
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