Macroeconomics 12th Edition by Rudiger Dornbusch ,Stanley Fischer,Richard Startz

Exercise 6

Suppose that an explicitly temporary tax credit is enacted. The tax credit is at the rate of 10 percent and lasts only one year.
a. What is the effect of this tax measure on investment in the long run (say, after four or five years)
b. What is the effect in the current year and in the following year
c. How would your answers in parts a and b differ if the tax credit were permanent