Question: Can you help with this problem? Thanks! Problem 3. Optimism [2 points}. Consider the two-period REC model of PK'a Chapter 13. Suppoae that the representative

Can you help with this problem? Thanks!

Problem 3. Optimism [2 points}. Consider the two-period REC model of PK'a Chapter 13. Suppoae that the representative household develops a very particular form of optimism about the future. It believes that the period-2 production function is: Y2 = F2(K) + A Where A is some positive number a. Use diagrams to represent the effect of an increase in optimism on employment, output, consumption, investment, the wage and the real interest rate? b. Does this type of optimism produce something that looks like a business cycle? Why or why not

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