1. Use the S-I model/diagram to analyze the impact of a rise in G. Answer thefollowing questions:
2. What is the impact of a rise in G on Savings? Why?Discuss.
3. Draw the S-I diagram and illustrate the impact of the shock. Label all curves, theinitial and the final equilibrium points, and theaxes.
4. Continue with b: illustrate either excess demand or excess supply (which ever iscreated by the shock) on the diagram in partb.
5. Now discuss the impact on I and S as the interest rate changes; make sure toprovide economic reasoning for the changes (I.e. explain the mechanism that leads to the changes).
6. State what was the impact of the shock on: Y, C, I, S, and r.