Question: Suppose that technological improvement raises productivity. What are the implications of this technological improvement on the economy? Use the AS-AD model to depict the impact

Suppose that technological improvement raises productivity.

  1. What are the implications of this technological improvement on the economy? Use the AS-AD model to depict the impact of this event on the economy.
  2. How can the government use fiscal policy to return the economy to equilibrium? Describe all possible alternatives. For every alternative use a separate graph.

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