Aggregated demand and aggregated supply shifts:
Carefully explain, using graphs, the effects of the following shocks on rst period aggregate supply and aggregate demand in our two period macro model.
For each shock, what happens to rst period consumption, rst period investment, rst period employment, the rst wage, and the rst period real interest rate (NOTE: Some shocks may have ambiguous effects).
1) An increase in government spending in the second period, G′
2) An increase in productivity in the second period, z′
3) An increase in the capital stock, K
4) An increase in current taxes T