Question: Consider a one-period model with optimizing consumers and profit-maximizing producers who are price-takers. Government spending is financed by lump-sum taxation, and its budget is balanced.

Consider a one-period model with optimizing consumers and profit-maximizing producers who are price-takers. Government spending is financed by lump-sum taxation, and its budget is balanced.

What is the equilibrium effect of a change in total factor productivity on the variables of your model?

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