5. A permanent increase in government purchases has a larger effect than a temporary increase of the

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5. "A permanent increase in government purchases has a larger effect than a temporary increase of the same amount." Use the saving-investment diagram to eval- uate this statement, focusing on effects on consump- tion, investment, and the real interest rate for a fixed level of output. (Hint: The permanent increase in government purchases implies larger increases in current and future taxes.)

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Macroeconomics Plus Myeconlab With Pearson Global Edition

ISBN: 377221

9th Canadian Edition

Authors: Andrew B. Abel ,Ben Bernanke ,Dean Croushore

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