Suppose the government introduces a new environmental regulation which significantly reduces productivity in the long run. To support the economy, the government provides a one-year corporate tax relief. Assume no other effects. In each of the following questions, indicate the short-run and long-run effects of these changes: show the original and new curves and use superscripts 'SR' and 'LR' to denote short run and long run curves, respectively.

a. Use the capital market diagram (MPK vs user cost) to show the effect on the equilibrium level of capital.

b. Use the labor market diagram (real wage rate vs employment) to show the effect on the equilibrium level of employment.

c. Use the goods market equilibrium diagram (real interest rate vs saving and investment) to show the effect on the equilibrium saving, investment and interest rate.

d. Use IS-LM diagram to show the effect on the equilibrium levels of output and interest rate.

e. Describe the long-run changes in key variables (capital, employment, investment, saving, GDP, real interest rate, price level).