Question: In Chapter 13 we studied how persistent total factor productivity
In Chapter 13, we studied how persistent total factor productivity shocks in a closed economy can provide an explanation for business cycles. In the second model studied in this chapter, with production and investment, determine the effects of a persistent increase in total factor productivity on domestic output, consumption, investment, and the current account surplus. Are the predictions of the model consistent with what you observe in Figure? Explain why or why not.
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