Question: 3. Suppose there is a decrease in current government spending. Use the real interternporal model {with production and investment] to analyse the effects of this

the real interternporal model {with production and investment] to analyse the effects

3. Suppose there is a decrease in current government spending. Use the real interternporal model {with production and investment] to analyse the effects of this shock on the economy. Draw diagrams for the labour and goods markets, and the production function. Determine the equilibrium effects of a decrease in current government spending on employment, output, consumption1 invesonent, real wages and the real interest rate. Provide a detailed econonnc analysis explaining your results with the aid of the diagrams

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