Labour productivity and the AD/AS model
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4 Terms
1
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What curve shifts if labour productivity increases due to an increase in capital labour ratio or an increase in MFP?
Both short run and long run aggregate supply curves will shift right
2
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What happens to aggregate demand?
It will shift right due to higher investment spending (either private or public).
3
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Will an increase in labour productivity affect inflation?
There will be no appreciable rise in the rate of inflation.
4
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Draw the AD/AS curve
correct
