a. Show that an increase in government spending that is productive in this fashion could increase welfare for the representative consumer.

Let the 9 curves in the figure to the right represent all possible PPFsLOADING...

?, and let curve B2 represent the initial PPF. All curves labelled with the same number have the same slope for every value of l. Curves whose labels include?'2' are steeper than curves whose labels include?'1' for every value of?l, and curves whose labels include?'3' are steeper than curve whose labels include?'2' for every value of l. Curves whose labels include A pass through h,?GA?, whose labels include B pass through h,?GB?, and curves whose labels include C pass through h,?GC.

?1.) draw a point at a possible initial optimal consumption bundle?(before the increase in government?spending, when the PPF is?B2). Label this point ?'P1?.'

?2.)draw a possible indifference curve corresponding to the representative?consumer's initial utility if P1 is the optimal consumption bundle. Label this curve ?'I1?.'

?3.) draw a point at a possible optimal consumption bundle after the increase in government spending if it increases welfare for the representative consumer. Label this point ?'P2?.'

?4.)draw a possible indifference curve corresponding to the representative?consumer's utility if P2 is the optimal consumption bundle. Plot the curve in a way that some horizontal or vertical line would pass through both this curve and I1. Label this curve ?'I2?.'