(Answered) Other theories of the business cycle emphasise the role of

Management Studies

Other theories of the business cycle emphasise the role of productivity ?uctuations. Suppose that instead of shocks to investment, that there are shocks to productivity that alter the natural rate of output but leave the natural rate of unemployment unchanged. Use the AD-AS model to examine the short run changes in output and in?ation that arise from an increase in the natural rate of output. In this setting, how is output related to in?ation? Assuming the natural rate of unemployment is unchanged, how is in?ation related to unemployment?

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