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Question # 2 [75 points] Use a graph of the goods market to show how the equilibrium changes in response to the following situations. For
Question # 2 [75 points] Use a graph of the goods market to show how the equilibrium changes in response to the following situations. For each situation, explain briey what you show on the graph. Part 23. [15 points] Suppose there is a tax cut for individual consumers in the current period, and that consumers are \"myopic\" so that they ignore any possible increases in future taxes. Assume there is no change in government spending G and assume that consumers do not face borrowing constraints. Draw a graph of the goods market to show how this tax cut will affect the equilibrium. Briey explain your graph. Part 2b. [15 points] Suppose there is a boom in the stock market and households feel wealthier. Assume the boom in the stock market does not affect rms' perceptions about the future marginal product of capital and assume that consumes do not face borrowing constraints. Notice also that the boom in the stock market does not affect current income (GDP), but it does increase wealth. Draw a graph of the goods market to show how this stock market boom will affect the equilibrium. Briey explain your graph. Part 2c. [15 points] Suppose there is an increase in depreciation allowances. In other words, rms can discount a higher depreciation rate from prots, with results in lower corporate prots and lower corporate taxes. Draw a graph of the goods market to show how this increase in depreciation allowances will affect the equilibrium. Briey explain your graph
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