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Could you please answer it by providing step by step solution and explanation ? I would be very grateful! (Intermediate Macroeconomic) Consider the real intertemporal

Could you please answer it by providing step by step solution and explanation? I would be very grateful! (Intermediate Macroeconomic)

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Consider the real intertemporal model with investment. The economy consists of two periods (current and future), there is a representative consumer who makes work-leisure choices and a consumption-saving choices, there is a representative firm that produces goods using capital lagging; using a production technology given by Y =ZF[K'N) , and can invest in capital, where the future capital stock is given by K, = (1d)K+ I , and nally there is a government that nances current expenditures through taxation. 4:!) Equilibrium in the current goods market determines the output demand curve and equilibrium in the labour market determines the output supply curve. Graphically depict the Mom market and goods market equilibrium using the labour supply and demand schedules and the output demand and output supply schedules. (2 marks) e) Consider a temporary decrease in current taxes while holding government spending in the present and future consan Using diagrams show the equilibrium effects on consumption, investment, the real interest rate, aggregate output, employment and the real wage. (5 marks) f) Consider a temporary increase in future total factor productivity, what are the equilibrium effects for current macroeconomic (capital, employment, output, labour) variables? Answer using diagrams and in words. What if the increase was permanent how would this suited the economy (again same macroeconomic variables)

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