objective is to understand the material in the image

PROBLEM 1: The problem of time inconsistency applies to fiscal policy as well as to monetary policy. Suppose the government announced a reduction in taxes on income from capital investments, such as new factories. 1. If investors believed that capital taxes would remain low, the government's action would result in a (Larger / Smaller) capital stock. 2. After investors have responded to the announced tax reduction, the government (Has / Does Not Have) an incentive to renege on its policy. 3. True or False: Given your answer to the preceding part, investors would not believe the government's announcement. PROBLEM 2: 1. Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 11 percent of GDP. If nominal GDP is rising 4 percent per year, such budget deficits (Are / Are Not) sustainable forever. 2. True or False: If budget deficits of this size are maintained for 20 years, future generations will likely pay roughly equal taxes. PROBLEM 3: Which of the following policies redistribute income from young to old generations? Check all that apply. O An increase in the budget deficit O An increase in Social Security benefits O Greater investments in highways and bridges O More generous subsidies for education loans