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1. Define what the multiplier is AND explain how and why it works. 2. Name some...

1. Define what the multiplier is AND explain how and why it works.

2. Name some government policies that could cause aggregate demand to shift.

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Answer #1

1.

2. Government has fiscal policy which includes change in government spending and taxation. Increase in government spending increases G component of AD and shifts AD curve rightwards.

Decrease in taxes increases consumption component of AD and shifts AD curve rightwards.

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