Question: Please help me solve these practice questions. 3 Two-Period Model with Endogenous Out- put Using the Real Intertemporal Model seen in class, sup- pose the
Please help me solve these practice questions.

3 Two-Period Model with Endogenous Out- put Using the Real Intertemporal Model seen in class, sup- pose the government announces a decrease in future government spending G' while keeping the current spend- ing G unchanged. 1. * * 10 How will you expect the decrease in G' to affect the N', NJ, Y', and Y curves? Show on well-labeled graphs and explain the driver (rea- soning) of each shift. 2. * * 10 Assuming that the change in Y is larger than the change in Y' in magnitude, what are the equilibrium effects on Y' and r*? Show on a graph and state clearly whether Y' and r* increase or decrease. 3. * * * 10 Taking into account the final adjust- ment in the labour market (due to the movement in r), do you think the equilibrium employment will increase or decrease? Justify your answer and show the expected change on the labor market graph. 4. * *k 5 Bonus question: What are the equi- librium effects on consumption C' and investment I'? Explain with words
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
