Fiscal multiplier

Question 3 (6 points) How large is the fiscal multiplier? Consider the real intertemporal model where one-time increase in government spending can make private firms more productive permanently; for example, government spending on roads and bridges lowers the cost of transportation in both periods of time. 3.1) (4 points) Based on the given assumption, discuss about the implication of the government spending on the current macroeconomic variables. Use the diagram that we discussed in class. 3.2) (2 points) Based on the given assumption, discuss about the situation when the fiscal multiplier of government spending on current output (Y) is large or small. Use the diagram that we discussed in class