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A Suppose There Is a Technological Breakthrough That Increases the Productivity

question 25

Essay

a. Suppose there is a technological breakthrough that increases the productivity of all capital and, consequently, increases the demand for investment. Using the long-run model of the economy developed in Chapter 3, graphically illustrate the impact of the increased investment demand. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction curves shift; and v. the terminal equilibrium values.
b. State in words what happens to: i. the real interest rate; ii. national saving; iii. investment; iv. consumption; and v. output.


Definitions:

Trigonometry

A branch of mathematics that studies the relationships between the sides and angles of triangles.

Formulas

Predefined instructions in mathematics or chemistry that provide a method for solving problems or equations.

Imagery

The use of descriptive language to create mental images for the reader or listener, enhancing the sensory experience of a text.

Loci

A method of memory enhancement which uses visualizations with the use of spatial memory, familiar information about one's environment, to quickly and efficiently recall information.

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