Problem
Suppose government spending increases temporarily in the New Keynesian model.
(a) What are the effects on real output, consumption, investment, the price level, employment, and the real wage?
(b) Are these effects consistent with the key business cycle facts? What does this say about the ability of government spending shocks to explain business cycles?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.