An important implication of the permanent-income hypothesis, Ask an Expert

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An important implication of the permanent-income hypothesis is that fiscal policy operates with a lag.

a. Explain why a permanent increase in government spending may cause the IS curve to shift out slowly over time rather than all at once.

b. If permanent income is a weighted average of last period's and this period's income, what determines the speed at which the IS curve shifts out over time?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91271702

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