Question: 6. LO 4 In Chapter 13, we studied how persistent total factor productivity shocks in a closed economy can provide an explanation for business cycles.

6. LO 4 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 efects 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 16.2? Explain why or why not.

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