Country X is a closed economy. It produces commodity Y by using labor N, with the...

 

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Country X is a closed economy. It produces commodity Y by using labor N, with the state of technology A. The production function for Y is Y=AN. In a particular year, Y=5,200 and N=2,000. The next year a new technology, capable of improving the country's production process, is introduced. As a result of this technological improvement, the labor productivity in the country increases to 3.8 and the output of Y increases to 7,280. Given that the country has a completely elastic LM curve, what will be the effects of these changes in the short-run? A. The employment level will decrease to 1,877 and the IS curve will shift inwards. B. The employment level will decrease by -6.15% and the IS curve will shift outwards OC. The employment level will increase by -6.15% and the IS curve will shift outwards. D. The employment level will decrease by 5% and the IS curve will shift inwards. Country X is a closed economy. It produces commodity Y by using labor N, with the state of technology A. The production function for Y is Y=AN. In a particular year, Y=5,200 and N=2,000. The next year a new technology, capable of improving the country's production process, is introduced. As a result of this technological improvement, the labor productivity in the country increases to 3.8 and the output of Y increases to 7,280. Given that the country has a completely elastic LM curve, what will be the effects of these changes in the short-run? A. The employment level will decrease to 1,877 and the IS curve will shift inwards. B. The employment level will decrease by -6.15% and the IS curve will shift outwards OC. The employment level will increase by -6.15% and the IS curve will shift outwards. D. The employment level will decrease by 5% and the IS curve will shift inwards.

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