Question: Consider the Real Intertemporal Model studied in class. Assume the domestic country receives some new machines from a foreign country which contribute to increase the

Consider the Real Intertemporal Model studied in class. Assume the domestic country receives some new machines from a foreign country which contribute to increase the current capital K.

a.How will this increase in capital K affect the Ns, Nd, Ys, and Yd curves? Give the driver of each shift.

b.Assuming the change in Ys is in absolute value more important than the change in Yd, what is the final impact on the equilibrium output, interest rate employment, the real wage, consumption, and investment? Explain your results

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