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Given an economy where government is deficit spending while operating at full employment.
Using a correctly labeled graph for real interest rates, explain how the increase in the deficit will affect real interest rates in the short run, ceteris paribus.
Explain the difference between government deficit and national debt by defining each concept.
Explain how private investment will be impacted by the government’s deficit spending.
If the government continues deficit spending, show the impact on a correctly labeled short-run Phillips Curve. Label the initial position A and the new position B.
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