(a) [15 marks] In 2050, advanced Artificial Intelligence technology is widely used in all companies. There is a sudden and sharp decline in productivity as the Robots decides we cannot run companies using Internet. There is a decline in both current and future total productivity. Analyse the effect of this shock on output, prices, interest rate, wage, employment, consumption and investment. Clearly explain how and why agents' decisions change. Use diagram to support your answer. (b) [10 marks]. Assuming that the economy is at the Zero lower bound (ZLB) due to the negative TFP shock in question a. There is uncertainty about the prospects of the economy and a fraction of banks' depositors panic and withdraw their funds, which decreases available credit and generates a large increase in spreads ft. What are the effects on output, interest rate and prices? Use diagram to support your answer. (c) [10 marks] Suppose that with the objective of increasing GDP, you are asked to design the optimal policy response so that the economy can escape from the ZLB. Analyse the expected macroeconomic effects of your proposal. (a) [15 marks] In 2050, advanced Artificial Intelligence technology is widely used in all companies. There is a sudden and sharp decline in productivity as the Robots decides we cannot run companies using Internet. There is a decline in both current and future total productivity. Analyse the effect of this shock on output, prices, interest rate, wage, employment, consumption and investment. Clearly explain how and why agents' decisions change. Use diagram to support your answer. (b) [10 marks]. Assuming that the economy is at the Zero lower bound (ZLB) due to the negative TFP shock in question a. There is uncertainty about the prospects of the economy and a fraction of banks' depositors panic and withdraw their funds, which decreases available credit and generates a large increase in spreads ft. What are the effects on output, interest rate and prices? Use diagram to support your answer. (c) [10 marks] Suppose that with the objective of increasing GDP, you are asked to design the optimal policy response so that the economy can escape from the ZLB. Analyse the expected macroeconomic effects of your proposal