Question 2 (6 points) Consider our real intertemporal model with investment. 2.1) (2 points) Suppose that it appears that new inventions will lead to major productivity improvements in the next few years. We will model this as an increase in z . Determine the effect (up, down, or no change) of this belief on each of the following: Current consumption C, Current investment I, Current labor input N, Current real wages w, Current output Y, The current interest rate r. Use the diagram that we discussed in class. 2.2) (3 points) Suppose that the expectation of productivity improvements turns out to be incorrect. In other words, suppose that consumers and firms assumed an increase in z when deciding on all first-period variables (including C, I, and N), but z turns out not to have increased. Relative to what would have happened if consumers and firms had made correct forecasts, determine the effect (up, down, or no change) of the (mistaken) belief of high future productivity growth on each of the following: Future consumption C', Future labor input N', Future real wages w , Future capital K', Future output Y'. 2.3) (1 point) Has this incorrect belief of consumers made them better off (in terms of lifetime utility) or worse off