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Economic Brief

August 2009, No. 09-08

Recent Fiscal Policy and the Manipulation of Aggregate Economic Activity

Kartik B. Athreya and Renee Haltom

It is widely believed that public sector spending and investment can restore aggregate economic activity to efficient levels. But some policy responses are likely to be more successful than others. In particular, directly targeting frictions in capital, labor, and insurance markets arguably provides the best chances of improving welfare.

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