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_l . L. I . 3'. 1' Llldllt. J.J.I.I.I.II.I.H. LiL I'FLJUJ. anon-ta. 2. Suppose that instead of simplv being a waste of output. government purchases
_"l . L. I . \"3'. 1' Llldllt. J.J.I.I.I.II.I.H. LiL I'FLJUJ. anon-ta. 2. Suppose that instead of simplv being a waste of output. government purchases are used for infrastructure which increases current productivity: I11 particular. suppose that the government increases its current purchases {6' increases] and that this in turn increases total factor productivityr {3 increases]. The government funds the higher expenditure by lump sum taxes. Using the stat ic general equilibrium model from class {and diagrams when possible]. discuss the effects this policy change will have on the equilibrium levels of output. employment. and consumption. Note: This question is more qualitative [ graph and discussion are enough]
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