In the real business model, a persistent increase in total factor productivity causes
A)the output demand curve shifting less than the output supply curve.
B)the money supply to shift right.
C)the price level to rise.
D)real wages to fall.
E)real interest rates to rise.

Question

Quizplus · Accepted Answer

A persistent increase in total factor productivity enhances the efficiency with which inputs are converted into outputs, leading to an increase in the supply of goods and services. This shift in the output supply curve is typically larger than any corresponding shift in the output demand curve, as the increase in productivity directly affects production capabilities rather than demand.

In the Real Business Model, a Persistent Increase in Total