Question: When we consider the basic Neoclassical model, how can we graphically analyze the effects of: (a) An increase in Gt+1. (b) An increase in At+1.

When we consider the basic Neoclassical model, how can we graphically analyze the effects of:

(a) An increase in Gt+1.

(b) An increase in At+1.

(c) A permanent increase in productivity (i.e. At and At+1 increase by the same amount). In each case. In each case, please clearly describe and explain how each endogenous variable changes.

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