"A permanent increase in government purchases has a larger effect + than a temporary increase of the same amount." 20.0- Use the saving-investment diagram to evaluate this statement, 18.0- So focusing on effects on consumption, investment, and the real interest rate for a fixed level of output. (Hint: The permanent increase in 16.0- government purchases implies larger increases in current and future 14.0 taxes.) 12.0 1.) Using the line drawing tool, show the effects of a temporary increase in government purchases. Label this line 'ST'. Real interest rate , r A 2.) Using the line drawing tool, show the effects of a permanent 8.0- increase in government purchases. Label this line 'Sp'. 6.0- . . . Carefully follow the instructions above, and only draw the required 4.0- objects. 2.0- Desired national saving & investment