(solution) Suppose the economy is initially in long-run equilibrium. Due to

(solution) Suppose the economy is initially in long-run equilibrium. Due to

Suppose the economy is initially in long-run equilibrium. Due to a technological advance, there is a permanent positive supply shock, i.e.

there is a permanently increase in productivity A. Explain both the short-run and long-run effects on the economy. 

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Short and long term effects on economy
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Long Term Effects:
In the long term economic progress,…