think about the effects of a 10% increase in government purchases. In answering the questions, you should take into account the fact that the government will have to finance its increase in purchases by raising taxes either now or in the future.

a. Suppose first that the increase is expected to be only temporary (that is, it starts today but last for one to two years). What will be the impact of the change on the current IS curve? On the current AD curve? Explain your answers and your assumptions fully.

b. Suppose instead that the increase is expected to be permanent (it starts today and last essentially forever). What will be the impact of the change in government purchases on the current IS curve? On the current AD curve? Explain your answers and your assumptions fully.